\u3000\u3 Shengda Resources Co.Ltd(000603) 165 Zhejiang Rongsheng Environmental Protection Paper Joint Stock Co.Ltd(603165) )
Event: the company released its annual report for 2021. In 2021, the company realized an operating revenue of 2.415 billion yuan, a year-on-year increase of 42.42%; The net profit attributable to the parent company was 284 million yuan, a year-on-year increase of 22.64%; The net profit deducted from non parent company was 259 million yuan, with a year-on-year increase of 19.66%.
Comments:
The operating revenue exceeded the expectation, and the cost was controlled through careful management. In 2021, the operating revenue of the company’s base paper products was 2.004 billion yuan, a year-on-year increase of 41.90%, and the operating revenue of paperboard products was 301 million yuan, a year-on-year increase of 7.41%. The overall gross profit margin was 15.44%, which remained stable compared with 15.69% last year. The company’s management expense ratio and sales expense ratio have remained at a low ratio for a long time. The net interest rate in 2021 is 11.78%, down 1.90 percentage points from 13.68% in 2020, mainly due to the increase of financial expenses and the decrease of other income (mainly tax rebates and other government subsidies). From January to March 2022, the company issued two announcements in succession. In 2022, it has received more than 34 million yuan of government subsidies, and the net interest rate is expected to rise in 2022.
The layout of 10 billion photovoltaic + papermaking industry is planned. In January 2022, the company signed the strategic cooperation framework agreement with Quanjiao county government of Anhui Province to invest in the construction of a comprehensive utilization project with an annual output of 1.3 million tons of recycled environmental protection paper and new energy, which greatly increased the company’s production capacity. The total investment of the project is about 10.5 billion yuan. The main construction contents include annual output of 1.3 million tons of recycled environmental protection paper, biomass cogeneration (annual treatment of 500000 tons of straw), operation management of 1GW distributed photovoltaic power station and photovoltaic product R & D and manufacturing. It is expected to complete the project approval in March 2022, land bidding, auction and listing in May, and complete the first phase of the project construction within two years. Quanjiao base adopts the “three wastes and one new” mode that takes into account environmental protection and economic benefits. Waste paper is used to produce recycled environmental protection paper, waste residue is used as thermoelectric fuel, urban treated wastewater is used as production water, and the construction of distributed photovoltaic power stations in Quanjiao county is carried out at the same time. The company has some experience in photovoltaic industry and has completed two phases of 10MW photovoltaic projects. In the future, it will seek to cooperate with the photovoltaic industry to create the second growth curve.
The main products are in short supply, and green papermaking is the general trend. The company’s packaging board segment industry (mainly including carton board and corrugated base paper) benefited from the upgrading of consumption and the rapid development of e-commerce, and the demand increased rapidly. According to the data disclosed by China Paper Association, the production of corrugated base paper in China in 2020 was 23.9 million tons, a year-on-year increase of 7.66% and CAGR from 2007 to 2020 was 4.60%; The consumption was 27.76 million tons, an increase of 16.93% over the previous year, and the CAGR from 2007 to 2020 was 5.37%. The gap between supply and demand continued to expand, and the company’s new production capacity had a certain consumption guarantee. On the other hand, the state has continuously issued policies to eliminate the backward production capacity of the paper industry and improve the access threshold of the paper industry. As a paper-making enterprise focusing on environmental protection and low-carbon development, the company will fully benefit from the industrial structure adjustment brought by the policy.
Maintain the “buy” rating: the company practices the concept of green papermaking. The main product market has large scale, strong stability and high certainty of new production capacity. It is expected that the company’s future performance will maintain rapid growth. Considering the progress of the company’s new recycled paper capacity layout and the landing rhythm of distributed photovoltaic projects, we adjusted the company’s revenue and performance. It is estimated that the operating revenue of the company from 2022 to 2024 will be RMB 2.888 billion, RMB 4.056 billion and RMB 5.545 billion respectively (before adjustment, it will be RMB 3.094 billion and RMB 4.331 billion respectively in 20222023), with a year-on-year increase of 19.59%, 40.47% and 36.71% respectively; The net profit attributable to the parent company was 392 million yuan, 527 million yuan and 721 million yuan respectively (432 million yuan and 608 million yuan respectively from 2022 to 2023 before adjustment), with a year-on-year increase of 37.75%, 34.46% and 36.78% respectively; EPS is 1.48, 1.99 and 2.73 respectively, and the corresponding PE is 11.98, 8.91 and 6.52 times respectively.
Risk tips: the risk of intensified market competition, the risk of price fluctuation of raw materials and raw coal, the risk of changes in environmental protection policies, the risk that the market demand is less than expected, and the risk that the new production capacity is less than expected.
