Key investment points
Event: on March 7, 2022, Qifeng New Material Co.Ltd(002521) issued a letter of price increase for decorative base paper. Due to the cost pressure caused by the rising price of raw material pulp, it is planned to raise the price by 1500 yuan on March 10. We believe that the conflict between Russia and Ukraine has led to high energy prices (up to 2022 / 3 / 4, Brent crude oil was 118 US dollars / barrel, up 21% on a weekly basis), poor logistics system (up to 2022 / 3 / 4, CCFI composite index 3389, year-on-year + 72%) and the impact of strike. The supply of pulp is tight, and the pulp price will remain high and volatile. It is expected that the decorative base paper industry may start the price rise mode.
The rise of pulp price leads to pressure on the cost side of the decorative base paper industry, and the industry may stabilize the disturbance of raw materials through product price rise. At present, the main pressure on the cost side of decorative base paper comes from the rise of raw materials (the total cost accounts for about 80%), of which wood pulp accounts for more than 50%. As of March 3, 2022, the price of imported wood pulp has increased significantly. The average price of International coniferous pulp / broad-leaved pulp is 655 US dollars / ton and 853 US dollars / ton respectively, which is + 9.17% and + 9.25% respectively compared with the end of 2021. In order to maintain normal production and operation, Qifeng New Material Co.Ltd(002521) 2021 reduced the price of some products, and the net profit attributable to the parent company in 2021q3 was – 89.5% year-on-year, with great profit pressure Hangzhou Huawang New Material Technology Co.Ltd(605377) and Xianhe Co.Ltd(603733) 2021h2 prices have not been lowered. Although the cost of 2022q1 rises, the profitability is relatively strong Qifeng New Material Co.Ltd(002521) took the lead in issuing the price increase letter of decorative base paper to improve the company’s operating conditions. We believe that Hangzhou Huawang New Material Technology Co.Ltd(605377) and Xianhe Co.Ltd(603733) are also expected to alleviate the upward pressure on costs through price increase.
The demand of the industry continues to improve and resist the fluctuations of the real estate cycle. Decorative base paper can be used in panel furniture, flooring, wall panels and other fields. In 2020, the scale of China’s decorative base paper industry was about 1.2 million tons, and the sales CAGR from 2011 to 2020 was about 11%. Among them, the growth rate of medium and high-end decorative base paper was significantly higher than the industry average. In 2020, the downstream demand of medium and high-end products continued to grow, and the sales of medium and high-end varieties in China accounted for about 60%. Compared with the European market, the penetration rate of medium and high-end decorative base paper in China has doubled.
The medium and high-end competition pattern is better, and the ability of favorable price is stronger. The middle and high-end decorative base paper industry has formed a relatively stable pattern of Hangzhou Huawang New Material Technology Co.Ltd(605377) , Xianhe Co.Ltd(603733) duopoly, and other competitors mainly develop low-end decorative base paper products. Judging from the implementation of Hangzhou Huawang New Material Technology Co.Ltd(605377) price increase in 2021, the price of medium and high-end decorative base paper is easy to rise but difficult to fall. At the same time, the product is highly non-standard customized, the customer stickiness is high, the value in the finished products is relatively low, the effect of medium and high-end products is significantly different from that of medium and low-end products, and the attribute of downstream demand cycle is weak. Leading enterprises have strong profitability, and the net interest rates of Hangzhou Huawang New Material Technology Co.Ltd(605377) and Xianhe Co.Ltd(603733) can reach 16-18%.
Investment suggestion: it is suggested to pay attention to the [ Hangzhou Huawang New Material Technology Co.Ltd(605377) ]: the total capacity will reach 270000 tons after 50000 tons are put into operation in January 2022, and 80000 tons are expected to be put into operation in 2023; Diversified specialty paper subdivision leader [ Xianhe Co.Ltd(603733) ], capacity expansion and acceleration; At the same time, the proportion of self supplied teaching materials is expected to be at the bottom of the recommended .
Risk tips: price fluctuation of raw materials, impact of imported paper, delayed production capacity, insufficient supply of raw materials, intensified industry competition, etc.
