The European Commission issued an anti-dumping investigation notice, and the company actively responded to the lawsuit. It is expected that the impact will be limited. The European Commission will issue a notice on June 14 to launch an anti-dumping investigation against Chinese decorative paper products in response to complaints from four European decorative paper manufacturers. The dumping investigation period is from April 1, 2023 to March 31, 2024. The damage investigation period is from January 1, 2020 to the end of the dumping investigation period. We believe that the impact of this anti-dumping policy is limited, mainly due to:
In 2023, sales in the EU accounted for less than 5% of the company's total sales of decorative base paper, which is relatively low; in addition, the company's sales in the European region all adopted a competitive strategy of high quality and the same price, and there is no competition at low prices. At present, the anti-dumping investigation is still in the preliminary stages, and it is expected that the impact on the company's sales of decorative base paper in the European Union in '24 is limited.
Referring to the company's previous anti-dumping lawsuit against Indian decorative paper, the tax rate was reduced after the company filed the complaint (adjusted from US$542 per tonne to US$297 per tonne). We believe that the company has sufficient experience in responding to lawsuits; in addition, the China Forestry Industry Association has organized companies in the industry to respond to lawsuits, and the company will also actively provide relevant materials to respond to the investigation.
The company has made thorough preparations to develop new markets and customers. Customer reserves are abundant, and overseas business volume is growing rapidly. We expect overseas market share to continue to increase effectively.
Short-term operation is safe, and there are deep barriers to decorative paper
Currently, the company has sufficient orders, production and sales are good, and production and operation are progressing steadily and in an orderly manner according to the goals set at the beginning of the year; in addition, the price of titanium dioxide on the cost side has declined, and changes in shipping prices have had a relatively limited impact on the company's overall profit level. We expect profit per ton to remain steady.
Decorative base paper has high production process and equipment requirements. The company's production line has more than 5,000 technical control nodes. Through precise system parameter settings and multi-link quality control tracking, it ensures that the performance of all indicators of the base paper is stable, the overall technical barriers are high, and it has a good reputation and customer stickiness within the industry. Along with the orderly expansion of production capacity, the market share is expected to increase steadily.
Maintain profit forecasts and maintain “buy” ratings
The company is a leading domestic decorative paper leader, with stable product quality, leading quality, and active expansion of overseas markets. It is expected that the impact of EU anti-dumping will be limited; in addition, the company continues to have high dividends to strengthen value growth. Previously, it was announced that the chairman proposed a mid-term dividend in 2024, and further increase the dividend ratio in 2024 (64% in 23). We expect the company's net profit to be 6.5/7.7/860 million yuan in 24-26 years, respectively, and the corresponding PE is 9/8/7X, respectively, to maintain a “buy” rating.
Risk warning: risk of price fluctuations of major raw materials; risk of market demand fluctuations; risk of anti-dumping policies, production capacity investment falling short of expectations, price transmission falling short of expectations, etc.