\u3000\u3 China Vanke Co.Ltd(000002) 191 Shenzhen Jinjia Group Co.Ltd(002191) )
Cigarette label business meets the turning point of repair, diversified products in large quantities, and large packaging is stable and far-reaching. The company is the leader in the tobacco label industry with a market share of about 10% (2020). From the perspective of marginal change, the share has declined slightly due to the change of bidding system in the early stage. After two years of digestion and adjustment, the latest bid winning situation is good, and the tobacco label business is expected to be repaired; In the long run, under the trend of high-end and centralization of cigarettes, the company’s share is expected to continue to increase. In terms of packaging business extension, the company firmly implements the large packaging strategy. While expanding and strengthening the main business of cigarette labels, the company expands the business of color box packaging and vertically extending packaging materials. With the deepening of cooperation with key customers and the promotion of intelligent packaging capacity construction, the large packaging business is expected to maintain medium and high-speed growth.
Supervision will promote the clearing of the atomization pattern, and HNB will benefit China tobacco supply chain enterprises if it opens up. Under the trend of increasing global penetration of new-type tobacco, benefiting from the outbreak of one-time small cigarette market in overseas markets, China’s e-cigarette industry has developed rapidly. In 2021, the export volume reached 138.3 billion yuan, an increase of 180% (industry association data). On March 11, China’s State Tobacco Monopoly Administration issued two heavy documents, the national standard for e-cigarettes (second draft for comments) and the measures for the administration of e-cigarettes, to supervise the implementation of boots and promote the clearing of the pattern. It is expected that the industry will move from disorderly expansion to orderly development. At the same time, the standardization process of electronic atomized tobacco has formed a mapping to the opening of HNB tobacco market. With the clear edge of the policy side, we believe that the process of China’s market is expected to accelerate and benefit the relevant enterprises of China tobacco supply chain.
Endogenous + M & A, the layout of the whole industrial chain of new tobacco is the first. In the early policy vacuum period, Shenzhen Jinjia Group Co.Ltd(002191) advanced the card position, and realized the layout of the whole industry chain of new-type tobacco. 1) in the field of HNB tobacco, the company is positioned as the supply chain service provider of China tobacco. It has been equipped with HNB flavor and fragrance company, Changyi technology, HNB cigarette manufacturing enterprise, Jiayu technology and HNB overseas marketing and promotion company. 2) In the field of electronic atomized tobacco, the company is positioned as an integrated solution provider, and has arranged yunshuo technology, an atomized tobacco and oil enterprise, Jinjia technology, an atomized OEM enterprise, and yinwei technology, an atomized brand enterprise. 3) The company entered the whole industrial chain of Materia Medica granules through Jiaju electronics, and built a new tobacco supply chain through YUNPU Xinghe, YUNPU Feixiang, etc. Benefiting from the introduction of new customers and the outbreak of overseas disposable small cigarette market, the company’s new tobacco revenue increased rapidly in 2021, reaching about 200 million yuan (+ 381.16%).
Equity incentive shows the company’s confidence in development, the main business is stable, and the new tobacco business further contributes to the flexibility space. According to the calculation of the company’s equity incentive target, the net profit CAGR from 2020 to 2023 is about 22.8%, which shows the confidence in the development of the main industry. At the same time, the card layout of the new tobacco industry chain is expected to contribute to the performance increment under the promotion of policies. Due to the good repair of the main business of tobacco label and the promotion of the layout of new tobacco, we adjusted the profit forecast. It is expected that the company will achieve an operating revenue of 5.08 billion yuan, 6.35 billion yuan and 8.26 billion yuan from 2021 to 2023, with a year-on-year increase of 21.3%, 24.9% and 30.0%, and a net profit attributable to the parent company of 1.006 billion yuan, 1.240 billion yuan and 1.525 billion yuan, with a year-on-year increase of 22.1% and 23.3% 23.0% (the previous forecast value is the income of RMB 5.12 billion, RMB 6.18 billion and RMB 7.42 billion, and the net profit attributable to the parent company is RMB 1.03 billion, RMB 1.27 billion and RMB 1.53 billion).
Investment suggestion: the company has deep barriers to cigarette label business, steady progress in large packaging strategy, layout of the whole industrial chain of new tobacco business, and upward options. Based on the closing price as of March 17, 2022, the current market value of the company is 20.5 billion yuan, corresponding to 20.4x and 16.5x PE in 2021 and 2022 respectively, while the average valuation level of comparable companies in the same industry is 35.5x and 25.2x. The main business of the company has a safety cushion and is rated “buy”.
Risk tips: public health and regulatory policy risk, risk of change in cigarette bidding system, failure to promote HNB policy
