\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 515 Shantou Dongfeng Printing Co.Ltd(601515) )
For more than 30 years, the double wheel drive performance and profit margin of “big packaging + big consumption” have been improved.
Dongfeng was founded in 1983 and has been deeply engaged in the industry for more than 30 years. It has grown into a leading enterprise in the cigarette label industry. It is one of the packaging and printing enterprises with the most complete industrial chain, with integrated service capacity and scale advantages. In 2016, the strategy was upgraded, the medicine bag and film business were arranged, the large packaging layout was improved, and the growth track of new tobacco, dairy products, consumer investment funds and so on was set up. Profitability improved in 2021, with roe leading the industry.
Large packaging industry: the drug packaging business has become the second growth curve, and the functional membrane structure has been upgraded and the production volume has been expanded.
Pharmaceutical packaging: according to the data of traditional Chinese Medicine Association, the CAGR of China’s medical packaging market reached 10.6% in 201419. The Association review policy accelerates the improvement of industry concentration, and the volume procurement policy optimizes production capacity. Dongfeng M & A is involved in the pharmaceutical packaging industry. It has set a strategic goal in 2020. It plans to achieve a revenue of 1.2 billion yuan in 2024, with a CAGR of 43.8% and a proportion of 25%. At present, the industrial layout of class I pharmaceutical packaging materials has been preliminarily formed. It is expected that with the expansion of production and volume, the gross profit margin will enter the rising channel; Base membrane and functional membrane: its subsidiaries focus on the production of differentiated base membrane and functional membrane. With the upgrading of structure and business volume, the profit is significantly improved. In 2021, PVA high resistance film will be mass produced, and it is planned to further expand the production to double the production capacity. At the same time, the valuation will be boosted by the integration of film business by subsidiaries.
Large consumption industry: the profits of new businesses are gradually improving, with long-term growth space.
New type tobacco: HNB is the key layout of the whole industrial chain, taking into account atomization, which is mainly sold to Europe, America, Japan, South Korea, Russia and other countries. As the loss range narrows, HNB is expected to develop rapidly after the implementation of policy rules. Dairy products: a variety of products including fresh milk, pure milk, yogurt and seasoned milk have been formed, and the range of business losses has continued to shrink. Actively solve the bottleneck of mass production of fresh milk and have long-term growth space.
Investment advice
The company is the first echelon enterprise in the cigarette label industry. It has the advantages of industrial chain and scale, high layout and long-term space. It is estimated that the net profit attributable to the parent company in 202123 will be RMB 650 / 790 / 960 million, corresponding to 15 / 12 / 10 times of the current share price PE. First coverage gives a “buy” rating.
Risk tips
The risk of sharp fluctuations in raw material prices, the risk that the growth of new business is lower than expected, and the policy supervision of HNB is higher than expected.
