Overseas channels have come to an end, and export sales are expected to recover.

23H1 export sales are 450 million, down about 45%. Export sales have benefited from a recovery in catering demand in '22 and ushered in a boom. After a round of high inventory digestion, market demand has now recovered, and foreign trade is expected to continue to recover in '24.

The company's main customers are large multinational supermarkets and restaurant chains. The downstream customers are high-quality, such as Amazon (Amazon), IKEA (Ikea), Walmart (Walmart), KFC (KFC), Starbucks (Starbucks), Costco (Costco), etc., and has cooperated with overseas supermarket giants for many years, forming a diverse product system and technology accumulation.

Hi Cha, Michelle Ice City, etc. are big customers with potential, and the company may benefit from a high increase in the number of leading companies that make fresh tea drinks.

(1) High growth in new tea customers: In the first half of 2021, Michelle Ice City became the company's main customer for tableware products, achieving sales volume of 32.66 million yuan for plastic products and 10.6 million yuan for paper products. The number of stores in Michelle Ice City worldwide has exceeded 32,000. (2) Full range of products and production capacity advantages: The company can produce tens of thousands of products of different types and specifications in the field of tableware and household daily necessities, covering a wide range, and can provide customers with multiple categories and one-stop services. (3) On the one hand, we plan to gain share in the new market of our original customers, and on the other hand, we plan to expand our growth by developing leading customers.

PLA has great potential as a degradable material to expand plant fiber products such as sugar bagasse.

The company uses both modified PLA raw materials and products, and has a strong first-mover advantage. It began layout after plastic restrictions began abroad in 2008, developed its own modified fully degradable materials in 2012, and welcomed rapid development in domestic fully degradable plastics since 2020. As of Q3 '23, the company's revenue from fully degradable products was 190 million, an increase of 84% over the same period, with impressive growth. The company caters to the policy trend of “plastic restrictions and plastic bans” at home and abroad. In terms of continuous expansion in the field of degradable products, the company plans to issue convertible bonds to invest in environmentally friendly material products with an annual output of 100,000 tons of bagasse. Plant fiber products have the characteristics of low cost, strong plasticity, and high degradation cycle efficiency. At the same time, plant residues originally used as fuel are converted and used to reduce incineration pollution, and at the same time achieve deep utilization of resources.

Maintain profit forecasts and maintain an “gain” rating.

The company supplies leading overseas customers for which disposable catering supplies are scarce. Domestic sales customers are Pizza Hut, Ikea, and New Tea. The chain chain of leading ready-to-drink tea brands has brought development opportunities to the company. We believe that Jialian Technology has a certain technical accumulation in the field of traditional plastic products. At the same time, it has excellent customer resources and channel advantages in the field of PLA products, and is highly profitable. The field of traditional high-end plastics has been accumulated over many years, and the leading layout of fully degradable products has accompanied the high downstream boom. We expect the company's net profit to be 0.9/1.3/150 million yuan in 23/24/25, respectively, and the corresponding PE will be 41X/28X/24X, respectively, maintaining the “increase in holdings” rating.

Risk warning: The international trade situation is getting stricter, raw material prices fluctuate greatly, exchange rates fluctuate greatly, fund-raising projects fall short of expectations, etc.