A leader in the plastic catering industry, multiple product layouts help growth. The company has been deeply involved in the industry for many years and maintains a leading position in the global plastic tableware manufacturing industry. Its main customers include domestic and foreign giants such as Amazon and IKEA. At the same time, the company is a leading large-scale, full-category manufacturer in China, and is committed to providing customers around the world with multi-category, one-stop procurement services. After entering 2024, the company's performance rebounded steadily. Among them, 24H1 net profit to mother increased by about 37% year-on-year to 0.062 billion yuan, and there is plenty of room for future performance improvement.

The plastic products industry is expected to clear up, and demand for biodegradable products is improving. Most plastic products companies are small. As environmental protection becomes stricter and trade frictions become normalized, backward small and medium-sized production capacity is expected to gradually withdraw, and industry concentration is expected to continue to increase. Meanwhile, in the context of the stricter global “plastic ban” policy, it is expected that by 2030, the global biodegradable plastics market will triple, and leading companies with leading technology and high-quality customers are expected to benefit.

Technology superimposes channel advantages to help the company expand. The company attaches importance to R&D, and has made breakthroughs in the fields of production automation and fully degradable materials. Among them, in 2018-2021, the number of new products in the company's tableware increased from 703 to 1,156, helping diversify the company's business. At the same time, the company's scale advantage is outstanding. In 2019-2023, the company's production capacity CAGR reached about 20%. On this basis, on the one hand, the company accelerated the launch of new projects such as Thailand, and on the other hand, acquired domestic and foreign companies such as Zhejiang Home Debao to further expand its scale advantage.

Deeply tied to high-quality customers, domestic and foreign sales can be expected to grow. The company covers the biodegradable materials and products industry chain for a long time, can respond quickly to customer needs, and has formed a strong customer and brand advantage. Among them, in terms of domestic sales, the domestic business revenue CAGR reached about 61% in 2019-2023, driving the share of domestic revenue from 20% in 2019 to 42% in 2023.

In the future, with the accelerated expansion of food and tea brands and the improvement of the company's product categories, the company's domestic business is expected to maintain a high growth rate; in terms of export, by expanding the categories of degradable products and speeding up the construction of overseas bases and channels, there is plenty of room for revenue growth.

Profit forecasting and investment advice

We believe that in the context of the stricter global “plastic ban” policy, there is plenty of room for demand for biodegradable products, etc. As a leading enterprise in the industry, the company's many planned projects will enter the production capacity release period, and the scale and category advantages are expected to expand. At the same time, the company is deeply tied to high-quality customers around the world. Domestic and export sales are growing strongly, and there is plenty of room for future growth. We expect the company's net profit to be 0.175, 0.213, and 0.263 billion yuan respectively in 2024-2026, and the corresponding PE will be 15 times, 12 times, and 10 times (corresponding to the closing price on September 10), respectively, covering the “buy” rating for the first time.

Risk warning

Raw material price fluctuation risk, trade policy risk, exchange rate risk, etc.