Main points of investment

On August 25, the company released its mid-term results for 2023: 2023H1 achieved revenue of 4.696 billion yuan (year-on-year + 21.47%), net profit of 103 million yuan (year-on-year-65.66%), and non-return net profit of 55 million yuan (year-on-year-80.20%). 2023Q2 company revenue 2.174 billion yuan (year-on-year-1.05%), home net profit 15.42 million yuan (year-on-year-91.21%), deducting non-home net profit-7.51 million yuan, Q2 cost improvement lag slightly under pressure, H2 paper price recovery, cost dividend release ushered in performance repair, CCER restart gradually approaching, forestry carbon sequestration growth space.

H1 paper industry is slightly under pressure, H2 improvement can be expected.

According to the products, the revenue of 2023H1 printing paper / packaging paper / industrial paper / office paper / wood sales / chemical products is respectively 24.70, 4.50, 0.38, 0.48, 0.11, 0.83 million, and the revenue is + 10.84%, 5.06, 5.78, 25.85, 219.60, 24.35, respectively, compared with the same period last year. Printing paper / packaging paper / industrial paper / office paper / wood sales / chemical products accounted for 53.22% of the total revenue, 9.71%, 0.83%, 1.33%, 1.78%, and wood sales increased, mainly due to the increase in the sales of Maoyuan forestry wood chips, a subsidiary of Maoyuan, compared with the same period last year. The gross profit margin of 2023H1 printing paper / packaging paper / industrial paper / office paper / wood sales / chemical products was 13.06% 8.90% 6.64% 5.08% 1.81% 29.64% respectively, year-on-year-7.55pct/-3.64pct/+0.39pct/-0.65pct/-1.28pct/+5.06pct. The decline in the gross profit margin of the papermaking business compared with the same period was mainly due to the digesting of the high price cost and the pressure on the base paper price in the first half of the year.

Profit margin is slightly under pressure and cash flow ring ratio is improved.

(1) profit margin: 23Q2 achieves a gross profit margin of 8.64% (year-on-year-8.56pct, month-on-3.17pct) and returns a net profit margin of 0.79% (year-on-year-7.19pct, month-on-month-3.66pct). There is a lag in the improvement of the cost side of Q2 products, which leads to the pressure on the profit side.

(2) period expense rate: the 23Q2 period expense rate is 9.96% (year-on-year + 0.05pct, month-on-month + 0.41pct), of which the sales expense rate is 1.18% (year-on-year-0.14pct, month-on-0.01pct), the management and R & D expense rate is 6.68% (year-on-year + 0.27pct, month-on-0.26pct), and the financial expense rate is 2.10% (year-on-year-0.08pct, month-on-month + 0.68pct).

(3) operating efficiency and cash flow: 23Q2 company accounts receivable and bills 911 million yuan (year-on-year + 122 million yuan, month-on-month + 283 million yuan), accounts receivable turnover days 31.77 days (year-on-year-3.58 days, month-on-month + 7.25 days), notes and accounts payable total 1.907 billion yuan (year-on-year + 80 million yuan, month-on-month-88 million yuan) Inventory is 5.74 billion yuan (year-on-year + 110 million yuan, month-on-month-7 million yuan). Inventory turnover days are 305.86 days (compared with the same period of last year). Cash flow, 23Q2 operating net cash flow of 123 million yuan (year-on-year-32 million yuan, month-on-month + 109 million yuan), a slight improvement.

H2 profit is expected to improve, CCER restart is approaching

From July to August, the bibcock of large-scale cultural paper is transmitted to the ground one after another, and the peak bidding season of Q3 cultural paper in autumn is expected to usher in a seasonal market. H2 low-price pulp gradually arrives in the warehouse, and profit elasticity is released season by season. On July 7, the Ministry of Ecology and Environment openly solicited opinions on the "measures for the Management of Voluntary greenhouse Gas Emission reduction Trading (trial)". On August 17, the national voluntary greenhouse gas emission reduction trading system accepted applications from market participants to open registered accounts and trading accounts. with the resumption of CCER in 2023, forestry carbon sequestration CCER is expected to contribute new profit growth points.

The layout of pulp and paper + carbon sequestration is deepened, and the prospect of CCER is promising.

The company has a paper production capacity of 1 million tons, pulping capacity of 500000 tons, an additional 450000 tons of cultural paper and 200,000 tons of chemical pulp project, the pattern is expected to be further optimized after put into production. Senhai carbon sequestration, a subsidiary of the company, is the main body of carbon sequestration business, relying on its own woodland resources, storing carbon credit, carrying out carbon sequestration business, planning carbon finance, and providing partners with "carbon sequestration +" integrated solutions. Relying on the experience gained from the first phase of carbon sequestration projects and its long-term forestry management experience, the company has actively laid out national forestry carbon sequestration projects. By the end of 2022, it will have 2 million mu of self-owned forest land and signed a formal development contract area of 35.11 million mu. It is estimated that by the end of 2025, a total of 50 million mu of forestry carbon sequestration will be signed, and the forestry carbon sequestration business will be promising after the resumption of CCER.

Profit forecast

Considering the orderly expansion of the company's pulp and paper production capacity, the growth curve of forestry carbon sequestration business after CCER restart is steep. We estimate that the company's operating income in 23-25 will be 101.71x115.24max 13.937 billion yuan, respectively, compared with the same period last year. The year-on-year net profit of + 3.98%, 13.30%, 20.95%, 20.95%, 20.95%, respectively, and 9.44%, respectively, of + 17.39%, 13.72%, and 9.44%, respectively. The corresponding EPS is 0.40, 0.46 and 0.50 yuan, and the PE is 16, 14, and 13X in 23-25, maintaining the "over-holding" rating.

Risk hint

CCER restart time is uncertain; paper prices fell faster than expected; capacity expansion was lower than expected.