Overview of events
Cofco Packaging released the 2020 annual report that the company achieved main business income of 7.345 billion yuan in 2020, + 0.8% year-on-year, and home net profit of 389 million yuan, + 28.9% year-on-year. Throughout the year, the company paid close attention to the two key points of epidemic prevention and control and production and operation, and its business performance went up against the trend and reached an all-time high. In addition, the Company proposes to pay a final dividend of RMB0.092 per share (equivalent to HK11.0 cents) and a final special dividend of RMB0.056 per share (equivalent to HK6.7 cents).
Analysis and judgment:
Revenue side: performance continues to recover, tinplate packaging business performance is good.
According to the category, the tinplate / aluminum / plastic packaging business achieved revenue of RMB 3660 million, respectively, with a year-on-year growth rate of + 8.0%, 6.1% and 1.8%, respectively. Among them, 1) aluminum packaging: it was greatly affected by the epidemic in the first quarter. With the alleviation of the epidemic, the performance has continued to recover since the second quarter. In 2020, the income of two cans / single cans was 2.948 billion yuan respectively, compared with the same period last year.-6.3% and 2.5% respectively. In the medium and long term, the change in consumption habits promotes the continuous expansion of the new generation of consumer categories, and the canning rate is accelerated by the epidemic, and the supply and demand pattern of the industry continues to improve. 2) tinplate packaging: the products have been realized and differentiated in the past 20 years, in which the demand for milk powder cans and aerosol cans is strong, while steel buckets, metal covers and square cans are growing steadily. According to the category, the income of steel drums / milk powder cans / aerosol cans / metal covers / three-piece cans / square cans / printing and coated iron is 9.58 6.78 cans / square cans / printing and coated iron, respectively, with an annual growth rate of + 8.6%, 25.5%, 9.1%, 44.7%, 10.0% and 24.5% respectively. With the exception of three cans, all sub-categories of tinplate recorded positive growth throughout the year. 3) plastic packaging: 20 years of company hand sanitizer, disinfectant and other disinfectant products packaging performance eye-catching, in addition, the active development of major customers, successfully entered the Unilever supply system, the annual plastic packaging revenue slightly decreased 1.8% compared with the same period last year.
Profit end: product structure optimization & reduce cost and increase efficiency, profitability continues to improve.
In 2020, the gross profit margin and net profit margin of the company were 15.84% and 5.35% respectively, which were + 0.78pct and + 1.16pct respectively compared with the same period last year. The profitability increased steadily. From a business point of view, the gross profit margin of the company's tinplate / aluminum / plastic packaging business in 2020 was 14.5%, 17.1% and 17.2%, respectively, and + 0.5pct/+0.6pct/+3.8pct, respectively. The gross profit margin of the main business increased in varying degrees compared with the same period last year. The main contents are as follows: 1) to optimize the product structure, the company conforms to the trend of differentiated tank type and the new trend of niche product market, speeds up the upgrading of product structure and layout in key areas of the country, and effectively realizes multi-tank switching and efficient production. 2) strengthen the cost reduction and increase efficiency, the company accurately grasp the purchase price of plastic particles, the cost advantage is obvious. In terms of period expenses, the expense rate during the company in 2020 was 10.38%, year-on-year-0.18pct, and the cost control was good, of which the sales expense rate, management expense rate and financial expense rate were 4.39%, 4.64%, 1.35%, respectively, and + 0.07pct/+0.26pct/-0.51pct, respectively, compared with the same period last year. The decline in financial expenses is mainly due to the decrease in the company's leverage ratio.
There was ample cash flow and dividends rose sharply throughout the year.
The company has abundant cash flow. In 2020, the net cash generated by the company's operating activities was 967 million yuan, + 78.84% compared with the same period last year. The cash flow of operating activities increased significantly, mainly due to the improvement of the company's sales scale and profitability and the full recovery of equity buyback funds from Qingyuan plus Duobao herbs. In 2020, the company has recovered the full consideration of RMB1.505 billion for the repurchase of Qingyuan Jiadobao herbs and a total of RMB500 million in the first and second tranches of promised dividends, and the arbitration of the dispute with Jiadobao has been withdrawn and terminated in accordance with the repurchase agreement. The smooth settlement of the dispute between the company and Kadobo has led to a substantial increase in cash flow. in addition to the interim dividend, the company intends to pay a final dividend of 0.092 yuan per share and a final special dividend of 0.056 yuan per share, with a total dividend of 31.1 Hong Kong cents per share for the whole year. + 122.9% year-on-year.
The competition pattern of the two-piece can industry continues to improve, and the market share is concentrated to the leading enterprises.
The supply and demand of the two-piece can industry tends to be balanced, and the competition pattern of the industry continues to improve. On the demand side, benefiting from the continuous implementation of the green and low-carbon cycle in China, the beer canning rate has increased, in addition, young people have gradually become the main consumer, the demand for diversified, convenient, healthy and other beverage products has gradually increased, and the rise of subdivided races has led to the continuous growth of the demand side. On the supply side, the epidemic accelerates the concentration of the industry, and leading enterprises such as Cofco packaging, relying on their own supply chain and capacity coordination, quickly resume work and production, ensure stable supply, and are rich in multi-can and special-shaped canisters. Market share has been further expanded. The company's production capacity layout has continued to advance. At present, the second-line layout of Tianjin and Wuhan has been launched, the production lines of Chengdu and Fujian have been accelerated, and new factories have been built in Kunming to further increase the market share of the southwest. Belgium project gradually stabilized with the overseas epidemic, speed up core customer certification In terms of customers, deeply bound with strategic customers, the company successfully entered Unilever's supply system in 2020, continued to provide personal service in the "factory in the factory" mode, and the proportion of strategic customers increased year by year to further improve the company's performance.
Investment suggestion
The company is the leader of metal packaging, 20 years in the context of the epidemic, the company timely adjustment, revenue and profits have reached a record high, performance exceeded expectations. In view of the fact that the company's performance has exceeded expectations, the company's income has been adjusted from 85.40 yuan and 9.12 billion yuan to 83.61 yuan and 9.363 billion yuan respectively from 2021 to 2022, and the return net profit has been raised from 3.76 yuan and 425 million yuan to 4.32 yuan and 499 million yuan respectively, and the company's income and net profit in 2023 are expected to be 103.27 yuan and 563 million yuan respectively. Based on the midpoint of the Hong Kong dollar against the renminbi on March 24, the corresponding PE is 9 times, 8 times and 7 times respectively, maintaining the "buy" rating.
Risk hint
The risk of a sharp rise in raw material prices; the increase in beer canning rate is not as expected; customer expansion is not as expected.