The company announced its 2020 performance report, with revenue of 7.345 billion yuan in 2020, + 0.8% year-on-year, and net profit of 389 million yuan, + 28.9% compared with the same period last year. 2020H2 achieved revenue of 3.968 billion yuan, + 10.0% year-on-year, and net profit of 207 million yuan, + 56.6% compared with the same period last year. The performance of the company's revenue side is slightly lower than we expected, mainly due to the long shutdown time of 2020Q1 affected by the epidemic and the increase in 2020H2's operating rate, but it is still unable to make up for the previous impact. The company received a dividend of 50 million yuan in 2020. Excluding this effect, the return profit was + 16.0% compared with the same period last year.

Tinplate packaging is growing against the trend, and the decline in the operating rate of aluminum packaging leads to a decline in income. In 2020, the company's tinplate / aluminum / plastic packaging realized revenue of 3660, 3107, 578 million yuan, respectively, compared with the same period last year, + 8.0%, 6.1%, 1.8%, 49.8%, 42.3%, 7.9%, respectively. The company's tinplate packaged steel buckets and milk powder cans grew upward with downstream core customers, with revenue growth of 8.6% and 15.1% respectively in 2020; at the same time, aerosol cans and metal cans were catalyzed by the epidemic, with revenue growth of 25.5% and 9.1% respectively in 2020. 2020Q1 was affected by the epidemic. The decline in the operating rate of aluminum packaging led to a decline in revenue, the operating rate of 2020H2 recovered upward, and the revenue of 2020H2 aluminum packaging was + 2.5% year on year.

The price increase of the product is smooth, and the gross profit margin of each business is increased. In 2020, the gross profit margin of tinplate / aluminum / plastic packaging was 14.5%, 17.1% and 17.2%, respectively, compared with the same period last year + 0.5/+0.6/+3.8pct. Aluminum prices continued to rise in 2020, with an average price of + 1.8% compared with the same period last year. The gross profit margin of the company's aluminum packaging business showed an upward trend, with 2020H2 gross profit margin from + 0.6pct to 17.4%. This is mainly due to the improvement of the company's production efficiency, the high proportion of high-quality foreign customers using floating pricing of raw materials downstream, and the operation of the 2020H2 European Belgian plant (the price of two cans in Europe is 30% higher than that in China).

Profitability upward, operating cash flow increased significantly, the continuation of high dividends. In 2020, the company's gross profit margin / net profit margin was 15.8% / 5.4%, respectively, compared with the same period last year + 0.7/+1.2pct. Financial costs declined, and the company's expense rate fell slightly to 10.4% in 2020 compared with the same period last year, with sales / management / financial expense rates of 4.4%, 4.7% and 1.4%, respectively, compared with the same period last year + 0.1/+0.3/-0.5pct. In 2020, the company made an upward profit, depreciated 377 million yuan, and the overlay should be recovered well. The net operating cash flow in 2020 reached 967 million yuan, + 79.1% compared with the same period last year.

The company has a good cash flow and attaches great importance to shareholder feedback, including special dividends. For the whole year of 2020, the company pays a dividend of 0.27 yuan per share, with a dividend rate of 80%.

As the supply of two-piece cans tightens in 2021, the company's profit elasticity is expected to be further released. Affected by the epidemic in 2020, the company's sales of two cans declined. Affected by the epidemic, the canning rate at home and abroad has increased rapidly, at the same time, the new production capacity at home and abroad is limited, and the supply of two cans at home and abroad is in a tight state. The company achieved full production from January to February in 2021, the second-line production of the plant layout in Tianjin and Wuhan, the acceleration of the Chengdu and Fujian plants, and the full operation of the Belgian plant promoted the further release of the company's production and sales, and the revenue end is expected to achieve higher growth in 2021. At the same time, the company's two-piece cans account for a high proportion of high-quality customers, and the "single factory two-line" layout and production automation transformation further improve production efficiency and form an effective support for the company's two-piece can profit margin. It is expected that the company's two-piece can business is expected to achieve both volume and profit in 2021.

The pattern of the two-piece can industry is optimized, the CR4 is close to 70%, the profit demand of the head enterprise is the same, and the price of the two-piece can continues to rise. The company's two-piece can business customer structure is good, through the "single factory two-line" layout to achieve efficient multi-can production; 2020H2 Belgium plant put into operation, sufficient orders to serve the European market with higher gross profit margin, profitability and stability are better than those of their peers. Three-piece can business to promote the layout of the factory, deep binding downstream core customers Feihe, Yili, Wanhua Chemical, volume growth. The current PB of the company is 0.7X, which is in the historical 18% quantile; in 2021, the PE of COFCO Packaging / Baosteel Packaging / Oruijin / Zexing is 9X/27X/16X/27X (consistent forecast of Baosteel, Oruijin and Zexing using Wind), with the lowest horizontal comparison valuation and sufficient safety margin. The profit elasticity of two-piece cans is released, the new products of three-piece cans business is growing rapidly, and the consumption attribute of the company is outstanding, which is expected to maintain steady growth. We look forward to returning to Hong Kong Stock Exchange in the future, and there is more room for further upward repair. The company still has a dividend of 188 million yuan to be recovered, and our profit forecast has not considered the dividend income for the time being. As far as the company's main business is concerned, due to the increase in the price of raw materials, we have lowered our profit forecast for 2021-2022 to 4.4 yuan and 510 million yuan (the previous value is 4.9 yuan and 590 million yuan). The net profit forecast for 2023 is 580 million yuan, and the year-on-year growth rate from 2021 to 2023 is 13.1%, 16.7% and 12.9%, respectively, corresponding to 9X/8X/7X, respectively, maintaining the "buy" rating.