Introduction to this report:

The company's performance is in line with expectations, the medium- to long-term strategic path and growth path are clear, and the short-term increase in executive holdings shows confidence in development.

Key points of investment:

Maintain expectations and “gain” ratings. The company's performance is in line with expectations, and we maintain the company's profit expectations. The company's EPS is expected to be 1.92/2.22/2.56 yuan in 2024-2026. Referring to the industry valuation level, the company was given 17.2xPE in 2024, the target price was raised to 33.11 yuan, and the “gain” rating was maintained.

The domestic market is stable, and the international market has performed well. By product, paper quality packaging/packaging ancillary products/ environmentally friendly paper and plastic products revenue ratio +15.2%/+11.1%/+28.8%, revenue contribution 70.5%/18.9%/7.4%; by application, 2024H1 consumer electronics, tobacco and alcohol bags and environmentally friendly products all achieved positive growth. Among them, the growth rate of cigarette packs was higher than the company's overall; by region, domestic revenue was +9.5%, foreign revenue was +32.2%, benefiting from the strengthening of global delivery capabilities, the company empowered downstream international customers to carry out The market and supply chain expanded, and the company's international market business remained booming.

Overall profit is stable. 2024Q2 gross profit margin 25.0%, +1.4pct year on year, +2.9pct month-on-month, net profit margin 7.2% to mother, -0.3pct yoy, +0.8pct month-on-month. The 2024Q2 sales/management/R&D/finance rate was 3.4%/6.9%/4.9%/-0.2%, compared with +0.3/+0.6/+0.5/+3.8pct. The increase in sales, management and R&D expenses was mainly due to the layout of overseas factories such as the Mexican base.

The increase in the financial expense ratio is mainly due to a decrease in exchange earnings. The company adopted an exchange-neutral strategy, and exchange earnings are basically hedged against changes in fair value.

The expansion of international customers has accelerated, and a high percentage of dividends in the medium term provides steady returns. The company has 50+ production bases and 5 service centers in 10 countries around the world, helping the company to significantly shorten production and transportation time and respond quickly to global market needs. Currently, overseas production accounts for about 20%. In the future, we will focus on serving international customers. Through expansion into new regions such as Europe, the target share will reach 35%.

The company mainly carries out asset-light base expansion in the form of leasing plants, etc., and capital expenditure pressure is expected to be limited. In addition, 2024H1's mid-term dividend was 0.3 billion, with a dividend ratio of 61%. Assuming a stable dividend ratio for the whole year, refer to our profit forecast and estimate a dividend rate of about 5% corresponding to the 2024 results. Meanwhile, the company plans to repurchase 0.1-0.2 billion in 2024, and has now repurchased about 15 million.

Risk warning: Prices of raw materials continue to rise, downstream consumer demand falls short of expectations, etc.