Introduction to this report:
The company actively develops high-quality supplementary fibers. Through technological improvements, the company aims to use wood fiber to replace imported waste paper and some wood pulp, which is expected to further expand its cost advantage.
Key points of investment:
Adjust profit expectations and maintain an “gain” rating. The company's 2023 performance was slightly higher than expected. Considering current weak demand and pressure on paper prices, we adjusted our 2024-2025 profit forecast and added a 2026 profit forecast. The company's 2024-2026 EPS is 0.16/0.20/0.29 yuan (the original value in 2024-2025 was 0.21/0.23 yuan). Referring to the industry valuation level, the company was given 12.8xPE in 2024, and the target price was lowered to 2.09 yuan, maintaining the “increase in holdings” rating.
Demand recovered moderately, and Q1 revenue improved year over year. 24Q1 revenue improved year-on-year. It is expected to be close to full production and sales in January and March. The February New Year shutdown will affect the operating rate by about 70%, corresponding to Q1 sales volume of about 1.5 million tons. On the price side, according to Zhuochuang information, the average price of box board paper in 24Q1 was 3808 yuan/ton, a slight decrease of 35 yuan/ton compared to 23Q4. Of these, the average price of 24M1/M2/M3 was 3839/3851/3753 yuan. It is expected that the decline in prices in March is related to weakening demand after the holiday season.
Profits are temporarily under pressure. 24Q1 gross margin of sales/deducted non-net profit margin of 9.9%/-0.2%, -1.8/1.0pct compared to the previous month. The estimated Q4 net profit per ton was 30 yuan+, and the Q1 single ton deducted non-slight loss. The month-on-month decline was mainly due to the increase in downtime and fixed costs during the Spring Festival. 24Q1 sales/management/R&D expense ratio 1.26%/4.42%/2.67%, +0.02/-0.24/-0.13/+1.05pct month-on-month.
Focus on demand repair & pattern optimization. In the short term, the average price of box board paper in April was 3,699 yuan, compared to March to 54 yuan. The follow-up focus will be on the improvement in downstream demand and the pace of price increases. In the medium term, the new production capacity center has declined significantly since 2024. Combined, demand has been moderately restored, the impact of imported paper has subsided, and the industry's supply and demand pattern has improved marginally. Currently, the company's annual production capacity is 8 million tons, and the historical profit center per ton is close to 200 yuan. Profit elasticity is worth looking forward to.
Risk warning: Prices of raw materials continue to rise, downstream consumer demand falls short of expectations, etc.