\u3000\u3 Bohai Water Industry Co.Ltd(000605) 007 Quzhou Wuzhou Special Paper Co.Ltd(605007) )
The company ranks in the top camp of China’s special paper industry: the company’s main products are divided into five product lines: Food cardboard, grasin paper, tracing paper, transfer printing paper and special cultural paper. After more than ten years of deep cultivation, the company has become one of the leading enterprises in China’s special paper industry. At present, the company has two main production subsidiaries, Zhejiang Wuxing and Jiangxi Wuxing, and has built a total of 7 base paper production lines. In December 2021, Jiangxi Wuxing put into production 500000 tons of food cardboard, raising the total production capacity of Wuzhou to 1.35 million tons, becoming the second special paper enterprise with a total production capacity of more than one million tons in addition to Xianhe Co.Ltd(603733) in the industry.
King in the field of food paperboard: after the Jiangxi five star 500000 ton food paperboard project was put into operation, the company’s total production capacity of food paperboard reached 780000 tons, ranking the leading position in China. The company expects that 200000 tons of liquid food packaging paper will be put into production by the end of 2023. The company continues to cultivate the field of food paperboard and achieve the position of king.
Internal circulation & Environmental Protection Policy & technological upgrading drive China’s specialty paper industry to continue its sunrise nature: the gradual expansion of the internal circulation policy will focus China’s future economic development on China’s consumption, while a large number of subdivisions of China’s specialty paper are closely related to daily consumption, and its development prospect and potential need not be discussed; At the same time, the accompanying upgrading of environmental protection policies, replacing plastic with paper, will be in consumption β On the basis of, bring great benefits to China’s special paper industry α Increment. In addition to the above two points, the driving force for the growth of China’s special paper industry is inseparable from technological upgrading. On the one hand, technological upgrading is reflected in the tireless efforts of existing products on the road of continuous “thinning”, on the other hand, it is reflected in the supply and demand creation. For example, the popular “lazy rags” in recent years, disposable kitchen and floor cleaning products are typical cases of supply and demand creation. The resonance of the three makes China’s special paper industry expected to continue its sunrise nature in the next decade.
The competition pattern of China’s special paper industry is benign, showing the trend of double dragons playing with beads. The good competition pattern has achieved the growth of the leading enterprises. From 2016 to 2020, the CAGR of Quzhou Wuzhou Special Paper Co.Ltd(605007) revenue was 12.6%, and the CAGR of net profit was 34.6%. After the production capacity has exceeded one million tons, Wuzhou and Xianhe have started a new round of industrial layout. On the one hand, the production capacity is distributed from Zhejiang to Hubei and Guangxi in the central and western regions, with a more balanced geographical distribution, which helps to grab more market share; On the other hand, from simple paper to upstream wood pulp and resource link layout, enhance the thickness and stability of gross profit margin. We believe that this new industrial layout will help the two leading enterprises of Wuzhou and Xianhe further open the strength gap with their peers, and the industrial competition pattern is expected to be more significantly optimized.
Profit forecast, valuation and rating: we expect the net profit of the company from 2021 to 2023 to be 391 million yuan, 523 million yuan and 672 million yuan respectively, equivalent to EPS of 0.98, 1.31 and 1.68 yuan respectively, and the corresponding PE is 17 / 13 / 10 times respectively. Combined with relative and absolute valuation methods, we believe that the company’s reasonable value is 23.19 yuan. At present, the company’s peg is less than 1 times and its future growth potential is good. It is covered for the first time and given a “buy” rating.
Risk tip: the increase of wood pulp and energy is higher than expected, the demand growth is lower than expected, and the risk of financing failure.
