China's leading manufacturer of wipes products
As a leading manufacturer of wet towels in China, the company actively develops cosmetics business to seek new growth. In August 2022, the company issued a stock incentive plan bound to the core team, with the target of revenue growth of no less than 10%, 30%, 50%, respectively, from 2023 to 2025, based on revenue in 2022. 2022-2023Q1 income and profit are in the high base state of disinfection wipes in the pre-digestion period, until the decline of 2023Q1 revenue and profit narrowed, the gross profit margin and net profit margin have stabilized and rebounded.
Competitive advantage: triple barriers such as technology, products and customers
1) Technology: as of December 2022, the company has invention patents / utility model patents / design patents respectively in 6-43-2, mastering a series of core technologies in solution formulation, production process and so on. the products have competitive advantages in safety, environmental protection and consumer experience. 2) production:
The company's wet wipes products cover more than 60 varieties of six series, but also develop some facial mask products and care products to meet customer needs. 3) customers: establish stable cooperative relations with world-famous customers such as Woolworths, Kimberly-Clark Group, Johnson & Johnson Company, L'Or é al Group, 3M Company and so on.
The second curve: medical dressings open room for growth
In December 2022, the company announced that it planned to jointly invest with Chuangjian Medical to set up a joint venture company, Anhui Jiechuang Medical, to carry out medical dressing business. Following the early layout of facial masks and care products, the company further distributes the high value-added machine-size dressing business and continues to expand the breadth and depth of cosmetics business, which is expected to become the company's second growth curve in the future.
Earnings forecast, valuation and rating
We estimate that the company's revenue from 2023 to 2025 will be 7.42 million yuan, 8.82 billion yuan, respectively, with a corresponding growth rate of 11.3 percent, 18.9 percent, 13.5 percent, 1.44 percent, 166 million yuan, and 2.2 percent, respectively. The corresponding growth rate will be 2.2 percent, 15.3 percent, 12.1 percent, 2.29 yuan per share, and 9.7 percent, respectively.
The value per share of the company measured by the absolute valuation method is 42.47 yuan, which is 23.7 times the average PE of the company in 2023. In view of the fact that the company's main business of wet wipes is expected to get out of the trough and the competitiveness of the cosmetics business is expected to be further strengthened after cooperation with Chuangjian Medical, the company will be given 24 times PE in 2023 with a target price of 42.59 yuan by combining absolute valuation method and relative valuation method. Coverage for the first time, giving a "overweight" rating.
Risk hints: raw material price fluctuation risk; exchange rate fluctuation risk; capacity utilization rate is lower than expected; new product research and development is less than expected risk; high customer concentration risk