Event description

The company released its semi-annual report for 2021: during the reporting period, the company achieved operating income of 1.248 billion yuan, an increase of 14.09% over the same period last year; the net profit belonging to shareholders of listed companies was 74.67 million yuan, up 19.33% from the same period last year; the net profit belonging to shareholders of listed companies after deducting non-recurring profits and losses was 67.77 million yuan, up 15.31% from the same period last year. The performance is basically in line with expectations.

Event comment

On the one hand, the deterioration of the supply and demand situation led to downward pressure on the company's revenue, on the other hand, Q2 net profit increased by 20% year-on-year, significantly exceeding the pre-epidemic level. 2021Q2, the company realized operating income of 606 million yuan, down 3.43% from the same period last year and 7.76% relative to 2019Q2; net profit from home was 47 million yuan, up 19.96% year-on-year and 20.51% relative to 2019Q2; and net profit from non-return was 41 million yuan, up 9.04% year-on-year and 7.89% relative to 2019Q2. Due to the sharp rise in the prices of upstream pulp and chemical materials in the first quarter, the production costs of enterprises increased. Although the prices of raw materials were adjusted back in the second quarter, the terminal demand became weaker, enterprises reduced prices to grab orders, and competition in the paper industry intensified. During the reporting period, the company's production line was running at full capacity, and the output increased significantly compared with the same period last year.

Reduce cost and increase efficiency, promote the decrease of expense rate during the period, and the net interest rate of Q2 increases significantly. During the reporting period, the company's gross profit margin was 18.35% (- 2.42pct) and net profit margin was 5.90% (+ 0.23pct), of which 2021Q2 gross profit margin was 17.50% (- 2.55pct) and net profit rate was 7.66% (+ 1.50pct). From the expense side, the expense rate during the company period decreased to 10.90% from the same period last year, of which the sales expense rate was 1.77% (- 3.36pct), the management expense rate was 8.01% (+ 1.65pct), and the financial expense rate was 1.12% (- 0.50pct).

The company continues to practice the concept of lean management, strengthen production cost control, improve equipment automation, effectively reduce ton paper costs, freight and labor costs, etc., with remarkable economic benefits.

Continue to plough paper-based special materials and vigorously promote technological innovation and upgrading. By predicting the market trend and implementing the strategy, the company's cumulative sales in the first half of the year increased by 14% compared with the same period last year, among which sales of thermal sublimation, protective key heat-sensitive products and membrane stickers increased significantly compared with the same period last year. During the reporting period, the company's R & D expenses reached 56.29 million yuan, an increase of 89.12% over the same period last year. The company applied for 15 patents, including 14 invention patents.

To promote the landing of the Yue Hua Bao project of stock exchange absorption and merger, the approval of the China Securities Regulatory Commission and the approval of the State Administration of Foreign Exchange on foreign exchange purchase were obtained in the first half of the year, and the declaration and implementation of the acquisition claim of dissenting shareholders were completed at the same time, and the work in the implementation phase of the reorganization was carried out smoothly. The company and Yuehua Bao B, which is merged with the stock exchange plan, are listed companies of China Chengtong Group and are the operating platform of the group's paper industry. The two sides can play a good synergistic effect in technology, raw materials, production and transportation, and will significantly enhance the advantage of scale. Among them, Guanhao's main products are thermal paper, thermal sublimation transfer paper, self-adhesive, carbon-free carbon paper and other high-end specialty paper, which is an industry leader with "coating" technology as the core. Yuehua Bao mainly produces high-grade coated white cardboard. "Hongta" brand coated white cardboard has a leading position in the quality of white cardboard industry at home and abroad, representing the highest level of coated white cardboard technology and products in China. The core technologies of the two listed companies have significant synergy effect, and they are located in Guangdong, their geographical location is close, and the production raw materials overlap. Through this merger, the two sides will maximize scale and synergy in procurement, R & D, production and logistics channels. At the same time, it is also conducive to the reorganization and integration of the internal paper plate of Chengtong Group, optimize the layout of the paper industry in Guangdong Province, effectively enhance the core competitiveness of the company, and finally maintain and increase the value of state-owned assets. According to the public information of the plan and the financial data of the two companies in the first half of 2020, after the completion of this transaction, Guanhao's earnings per share are expected to increase by more than 20%, greatly increasing the shareholding income level of Guanhao's existing shareholders.

Investment suggestion

It is estimated that the company's net profit returned to the parent company from 2021 to 2023 is 2.13,2.78 and 324 million yuan, an increase of 19.18%, 30.62% and 16.64% over the same period last year, corresponding to an EPS of 0.12 gamma 0.15 max 0.18 yuan and a PE of 45.42,34.77 and 29.81 times. The company's main specialty paper products are closely related to people's daily life, and there is a great demand in many fields, such as daily chemical, food, beverage, medicine, logistics and supermarkets. With the effective control of the epidemic and the full recovery of food, beverage and daily chemical industry, the demand for products will show a growing trend, and profitability is expected to return to the normal level. At the same time, after the completion of the merger, Guanhao's resource integration advantages and economies of scale are expected to be further enhanced to maintain the "overweight" rating.

There are risks

Macroeconomic growth falls short of expectations; market promotion falls short of expectations; risk of raw material price fluctuations.