\u3000\u3000 Quzhou Wuzhou Special Paper Co.Ltd(605007) (605007)
On December 14, we released the in-depth report Quzhou Wuzhou Special Paper Co.Ltd(605007) : leading enterprise of high growth paper-based materials in the era of replacing plastic with paper, which deeply disassembled the company's core competitiveness, industry characteristics and growth drivers. Based on exchange feedback, we combed and understood the hot issues of the company.
I: how do you think the company's roe continues to lead?
The high roe part comes from the high ROA, which is based on the efficient production form of products and the company's unique low-cost advantage. From the perspective of production form, the company focuses on food packaging paper, grasin paper and other paper types. The market capacity of core products is large, and the production capacity of a single product of a single paper machine is large, so there is no need to switch frequently between different paper types. Improve production efficiency. From the perspective of production cost, the company has a unique low-cost advantage and has a professional technical transformation R & D team with the founder as the core. Through the introduction of foreign second-hand paper machines for technical transformation, the company achieves the purpose of reducing the investment in fixed assets and production cost. In addition, after the Jiangxi base is fully put into operation, the scale effect is further highlighted and the cost advantage is enhanced.
Second: on the pattern, what do you think of the barriers of food packaging and special paper industry?
It has double barriers of production end and client end. Special paper generally has the dual barriers of production applicability and customer binding, among which food packaging paper has higher safety requirements. Production side: while emphasizing efficiency, it requires flexibility. Considering the scale effect, it is difficult to cut into the social card large-scale paper machine; On the other hand, fluorescent residues are prohibited in contact with food, which is a red line that can not be touched by medium and high-end customers. Food packaging has the special characteristics of special lines. Client: downstream customers are mostly food and beverage brand customers, with high concentration, high requirements for supplier quality, stability and scale, long certification cycle, customized production and high requirements for after-sales service; In addition, European and American high-end customers also require more stringent FSC certification, which naturally excludes some enterprises. In the long run, the EIA indicators are tightened, and the threshold for expanding production is scarce. The company's long-term Hubei 4.49 million tons of pulp and paper integrated production capacity points out the medium and long-term growth path.
III: how about the space and growth of food packaging paper?
Industry level: food packaging paper is a high-quality segment with the largest space and high growth among special paper. The market scale will reach 2.054 million tons in 2019 and is expected to reach about 4.8 million tons in 2025. Under the background of increasingly strict plastic ban, it has entered the accelerated capacity expansion period. In addition, the rapid growth of chain catering and new tea drinks, as well as the domestic substitution dominated by liquid bags, will gradually release the increment to the industry. In addition, food grade white card production capacity is concentrated in China and Europe. Affected by the epidemic and overseas political and economic situation, European production capacity has declined, which can only meet the needs of the European region. The demand outside Europe, such as North America, the Middle East and Southeast Asia, promotes China's food white card export.
IV: what do you think of the production capacity of 300000 tons of cultural paper?
The 300000 ton cultural paper production line of Jiangxi base of the company aims to make full use of cogeneration and supporting equipment in the park to maximize scale effect and economic benefit. From the perspective of scale effect: a new bulk paper production line has the highest cost performance for making full use of the supporting Cogeneration Equipment. The main reason is that the output of a single production line is large and stable, there is no need for too much debugging and technical transformation compared with special paper production, and the downstream demand is extensive, which is convenient for capacity digestion. From the perspective of environmental protection: with the tightening of environmental protection policies, the layout of large-scale production bases can better realize the water circulation in the park. Taking cultural paper as an example, the company's cultural paper production process can use the white water formed in the grasin paper process. In the same case, a single ton of water can produce more finished paper to reduce the water consumption of clean water and sewage discharge.
V: how to see the impact of wood pulp on the company's profit?
Wood pulp is the main component of the cost. Based on the customer stickiness brought by production barriers and the direct sales model, special paper has a good and timely upstream cost transmission ability. In addition, before the expected increase in the cost of a large level, based on the advantages of scale and the accumulation of cooperation with pulp mills, the company hedged the increase in cost by actively hoarding pulp. Taking 21h1 as an example, under the background of the increase in the price of wood pulp, the profit margin increased instead of decreased. Looking forward to the future, broad-leaved pulp manufacturers have added / intend to add large capacity, and there is no internal logic of sharp rise in paper price. At the same time, the company is speeding up the layout of the mechanical pulp production line with the maximum consumption of white cardboard, saving costs and thickening profits.
VI: how to view the valuation level?
From a relative perspective, pe-ttm and Xianhe Co.Ltd(603733) are at the same level since the company was listed to 21h1. The short-term differentiation of profits in 21q3 has led to valuation deviation, and we judge that the company will enter the inflection point of profit rising quarter by quarter since 21q3. From an absolute point of view, the current pe-ttm of the company is lower than its historical center, and the profit growth rate has entered an acceleration inflection point since 21q3, and entered a high growth period in 2022, with the growth rate obviously leading the industry. The current valuation has a strong margin of safety and has the valuation repair space brought by high growth verification.
Profit forecast and investment suggestions
The company's production and sales advantages complement each other and have strong competitiveness α Property, the industry has a high outlook under the background of plastic ban and high growth of new business forms. We expect the company to enter the stage of quarterly increase in scale. Under the background of scarce production expansion indicators brought by double carbon, the company's future Hubei pulp and paper integrated production capacity points out a clear long-term driving force. We expect that the company's visible growth rate in the short and medium term is significantly higher than that of the industry. The new round of high growth after listing will be verified quarterly, with the dual driving force of high profit growth and valuation repair. We expect the company to realize a net profit attributable to the parent company of RMB 391 / 690 / 866 million from 2021 to 2023, with a year-on-year increase of 15.5% / 76.4% / 25.5%; The corresponding PE is 21.66x, 12.28x and 9.8x respectively. At the current position, we are firmly optimistic and maintain the "buy" rating.
Risk tips
The price of raw materials fluctuated sharply, the market competition intensified, and the production capacity was less than expected.
