Company Releases 2024 Interim Report

The 24Q2 company's revenue was 7.59 billion, up 2.6%; net profit to mother was 0.07 billion, up 6.1%; net profit without deducted to mother was 0.09 billion, a decrease of 57.0%. 24H1's revenue was 14.25 billion yuan, up 3.7%, representing an increase in sales in the papermaking sector in the current period; net profit to mother of 0.11 billion, an increase of 141.9%; net profit after deducting non-return to mother - 0.11 billion yuan, an increase of 75.2%; the non-recurring revenue for the current period was mainly operating subsidies of 0.25 billion yuan.

By business, papermaking revenue was 9.55 billion yuan, up 9.4%, accounting for 67.0%; packaging revenue was 3.29 billion, down 3.7%, accounting for 23%; and trade revenue was 1.01 billion, down 10.3%, accounting for 7.1%.

By region, domestic revenue was 12.21 billion, up 3.4%, accounting for 85.7%; foreign revenue was 1.8 billion yuan, up 13.0%.

The 24H1 gross profit margin was 8.79%, an increase of 0.1 pct; of these, the gross profit margin of papermaking was 6.7%, an increase of 0.3 pct; the gross profit margin of packaging was 12.5%, a decrease of 0.3 pct; the gross profit margin of trade was 10.5%, an increase of 0.6 pct; the company's 24H1 net profit margin was 0.62%, an increase of 3.1 pct. 24H1's sales rate is 1.2%, same reduction of 0.1 pct; management rate is 4.1%, same reduction of 1.5 pct; R&D rate is 2.7%, same reduction of 0.3 pct; financial rate is 3.9%, same reduction of 0.1 pct.

The joint development of domestic and foreign production capacity enhances the advantages of industrial chain integration. The company has continuously improved the domestic regional layout through self-construction and mergers and acquisitions. Currently, it has six major paper manufacturing bases in Maanshan, Zhejiang, Zhangzhou, Fujian, Jingzhou, Hubei, Zhaoqing, Guangdong, and Fuyu, Jilin, with a current production capacity of about 8.12 million tons. 24H1's raw cardboard output was 3.42 million tons, up 13.6%, and sales volume was 3.4643 million tons. The same increase was 17.1%, and the production and sales rate was 101.3%, achieving balanced growth in production and sales. After the completion of the 1.8 million ton production capacity of the Suzhou base of the project under construction in the future, it will eventually push the company to complete the strategic production capacity layout of nearly 10 million tons and lay a solid industrial foundation for the company's future sustainable growth.

The company promotes international strategic layout through the acquisition of recycled fiber resources, advantageous markets and the deployment of high-end paper types. It continues to carry out trade business in major sources of recycled fiber such as the United States, the United Kingdom, and the Netherlands, and lays out recycled pulp overseas to ensure the high-quality supply of upstream raw materials. The company's participating company, Nordic Paper, has a total production capacity of 0.5 million tons of high-end specialty pulp, and the holding subsidiary Phoenix Paper has an annual production capacity of 0.36 million short tons of multi-category cultural pulp.

Raw material costs improved in the second half of the year, and industry profits slowly improved

Pulp prices remained high in the first half of the year, mainly due to ① rising demand for terminals in Europe, increasing consumption driving up terminal inventories, driving up broadleaf pulp prices in Europe, and at the same time driving up broadleaf pulp prices in China; ② overseas pulp mills stopped production due to many accidents such as port strikes and accidental explosions in overseas coniferous pulp mills; ③ recovery in demand in Europe and the US.

In the long run, as the impact of the negative events in the first half of the year subsides, combined with the commissioning of many domestic and foreign chemical pulp projects and the commissioning of Suzano's 2.55 million tons of broad-leaf pulp production capacity in 24, it is expected that external and domestic pulp prices may drop simultaneously in the second half of this year. At the same time, due to the decline in the price of downstream finished paper products and the weak consumption trend of waste yellow paperboard, the price trend of 24H1 waste yellow paperboard mainly falls. It is expected that the price trend in the waste yellow paperboard market will rise and then fall in the second half of the year. According to a comprehensive analysis of pulp prices and domestic waste prices, domestic paper companies' raw material costs may be further improved, and industry profits are expected to slowly improve in the second half of the year.

Adjust the profit forecast to an “increase in holdings” rating

Based on 24H1's performance, the company's revenue growth was small. We adjusted our profit forecast. We expect to return 0.4 billion, 0.64 billion, and 0.86 billion in 24-26 (original value 0.56/0.94/1.18 billion, respectively); PE is 16X, 10X, and 7X, respectively.

Risk warning: industry risk; policy risk; overseas investment risk; macroeconomic fluctuation risk, etc.