Zijiang enterprises: The leading position of plastic packaging in China is stable, and the main business is stable and the dividend rate is excellent.

The company was founded in 1988 and listed on the Shanghai Stock Exchange in 1999. In 2012, it became one of the leading PET bottle monopolies. It is the core domestic supplier of Coca Cola and Pepsi, continues to extend the industrial chain and expand the product matrix, and has become a comprehensive leader in OEM packaging products and services related to filling, crown caps, etc. The company's main products include PET bottle packaging and color printed paper packaging, which accounted for 18% and 21% of revenue respectively in 2023, and are expected to maintain steady growth.

1) PET bottles: Total demand continues to grow along with the growth of the terminal beverage market, and downstream beverage types are differentiated. Among them, ready-to-drink tea and energy drinks show a high growth rate. The competitive pattern of the industry is good, and the PET bottle packaging market shows a duopoly pattern. The company is one of the most important suppliers of PET bottles and preforms in China. It cooperates with downstream leaders such as Coca Cola, Pepsi, and Unification to drive other supporting categories such as bottle caps and labels through OEM integration in the supply chain, while continuing to develop high-growth emerging brand customers and customers in new fields. 2) Paper packaging: Downstream restaurant chains continue to grow. The government has issued plastic restrictions, restaurant chains respond positively to environmental protection policies, and the growth trend in demand for paper packaging is clear. The company covers a comprehensive range of color printing paper packaging products, has outstanding R&D advantages, and excellent customer development capabilities. It drives growth through increased customer share and new user development.

The company's revenue remained stable in 2018-2023, and net profit due to mother was slightly pressured in '23, and 24Q1-3 has rebounded steadily. In 2018-2023, the company's profitability increased steadily. The share of the high-gross margin aluminum-plastic film business increased, real estate trading business losses decreased, and gross profit margin and net interest rate increased slightly to 21.4% and 6.74% respectively. The company's main business performance is steady, and dividends continue to give back to shareholders. Since 2019, the dividend rate has remained above 60%, and the dividend rate reached 3.42% as of December 12, 2024.

The real estate business has impressive profits, and 24Q4 results are expected to reach an inflection point and enter an emerging circuit to open up long-term space. The company continues to expand its business segment and has become a comprehensive group covering packaging business, FMCG trade business, import and export trade business, real estate business, and venture capital business. Among them, the subsidiary Zijiang Xincai is a leading aluminum-plastic film functional material for new energy batteries, and was listed on the New Third Board on July 8, 2024. In terms of real estate business, the acquisition cost of “Shanghai Jingyuan” high-quality real estate assets is low. Scarcity is prominent in the context of China's strict control of villa land. Profits are expected to be carried over in 2024Q4, and will continue to contribute considerable profits after the next four phases of the project are developed and sold. In terms of industrial investment, domestic substitution in the aviation sector has been fully accelerated, and the large domestic aircraft C919 is expected to be rapidly released. Angge Avionics, which the company's indirect shareholding, is expected to benefit from the C919 high-quality integrated avionics solution provider. At the same time, Angji Avionics and Geely's WoFei Aerospace collaborated to develop an avionics system for vertical take-off and landing aircraft, which is a low-altitude economy for emerging industries.

Investment advice: The company's main business steadily contributed to excellent dividend rates. The real estate business released profits to help the 2024Q4 performance inflection point. The layout of high-quality assets such as aluminum-plastic film and avionics solutions for large aircraft can be expected to grow. We expect Zijiang's 2024-2026 revenue to be 9.229, 10.186, and 10.968 billion yuan, up 1.24%, 10.37%, and 7.68% year-on-year; net profit to mother will be 0.687, 0.878, and 0.946 billion yuan, up 22.70%, 27.82%, and 7.78% year-on-year. The corresponding PE is 15.2x, 11.9x, 11.0x, and a target price of 10.44 yuan.

Risk warning: Risk of large fluctuations in raw material prices, declining profit levels in the new energy business, falling short of expectations in other businesses, assumptions and estimates falling short of expectations.