The company released the 2024 mid-year report performance forecast

The net profit of 24H1 is expected to be 0.9 to 0.14 billion yuan, an increase of 133% to 150%, after deducting non-return net profit of -1.0 to -0.14 billion, +77% to +68% year-on-year;

Net profit for 24Q2 was 0.5 to 0.1 billion, -27% ~ +37% year-on-year; Q2 net profit without return to mother was 0.9 to -0.13 billion, or -43% to -111% year-on-year.

24H1 increased its production capacity, producing 3.4195 million tons of raw cardboard, up 13.59% year on year, with sales volume of 3.4643 million tons, up 17.10% year on year, with a production and sales rate of 101.31%, achieving a balanced increase in production and sales.

At the same time, the company continues to promote cost reduction and efficiency, lean production, and continuously optimizes operating capital. 24H1 management and marketing expenses decreased by about 20% over the same period last year.

In the second half of the year, the company will seize the opportunity of the traditional peak consumption season and continuously improve the utilization rate of new production capacity. Cost reduction, efficiency and scale effects will be further highlighted, and the trend of improving profitability is expected to continue.

Actively promote asset disposal and take more measures to maintain market confidence

In order to prepare “Mountain Eagle Convertible Bonds” and “Eagle 19 Convertible Bonds”, the company actively promoted the disposal of various assets: 1) Introduce investment to increase capital to subsidiaries: the company's Huazhong Shanying and Guangdong Shanying subsidiaries introduced investors one after another, and capital increase subscription payments were gradually put in place;

2) Proposed sale of Nordic Paper: The revenue/profit of Nordic Paper reached 3.18/0.3 billion yuan, net assets were 0.85 billion yuan, and the company's shareholding ratio was 48.16%; the transfer of shares in Nordic Paper is currently progressing smoothly; 3) Proposed transfer of part of the wholly-owned subsidiary shares: On June 21, the company and Jiangdong Group signed a “Equity Transfer Framework Agreement” to transfer 51% of the shares of the wholly-owned subsidiary Xiang Heng Creative to Jiangdong Group, and the target companies achieved 7.39/0.37 revenue and profit respectively in 23 years billion yuan, net assets are 2.26 billion yuan; in addition to the equity transfer, the company will return about 2 billion yuan of transaction funds.

In addition, Taisheng Industrial, the controlling shareholder of the company, plans to purchase “Mountain Eagle Convertible Bonds” for no less than 0.2 billion yuan and hold them until maturity. The company plans to use 0.35-0.7 billion yuan to repurchase the company's shares to convert convertible bonds issued by listed companies (the repurchase price is no more than 1.7 yuan/share, including the principal amount).

We believe that taking more measures will help enhance investors' confidence, promote a reasonable return of the company's stock price to long-term intrinsic value, and promote the stable and sustainable development of the company.

Adjust profit forecasts to maintain “buy” ratings

As the peak season of the second half of the year approaches, the company's main paper industry is expected to recover, and additional production capacity will continue to be released. In addition, the results of cost reduction and efficiency are showing. According to the company's mid-term report forecast and the business environment for the first half of the year, we lowered our 24-year profit forecast, which is expected to be accompanied by increased demand. Net profit for 24-26 is 0.56/0.94/1.18 billion, respectively (previous values were 0.77/1.05/1.26 billion, respectively), and PE is 12/7/6X, respectively.

Risk warning: risk of raw material price fluctuations; downstream demand recovery falling short of expectations; risk of asset disposal falling short of expectations; performance forecasts are only preliminary estimates; specific data is based on semi-annual reports, etc.