\u3000\u3000 Xianhe Co.Ltd(603733) (603733)
Core view
The forward-looking and diversified production capacity layout has helped the company steadily increase its share and continue to consolidate its leading position in the industry. The special paper industry began to enter the stage of structural growth, with strong downstream demand for some subdivided paper types. As a leading enterprise in the special paper industry, the company is prospectively distributed in high prosperity paper types such as heat transfer paper, food packaging paper and grasin paper. According to the existing production plan, it is expected to increase the papermaking and pulping capacity by 930000 tons and 700000 tons respectively by the end of 2024 (an increase of about 145% compared with the pulp and paper capacity by the end of 2020), It is estimated that the average annual compound growth rate of pulp and paper output will reach 23% from 2021 to 2025. The forward-looking production capacity layout contributes to the first mover advantage, and the company is expected to take the lead in benefiting from the growth dividend of subdivided industries. We estimate that the market share of the company's output will reach 17% in 2023, about 5pct higher than that in 2020. The leading position in the industry will continue to be consolidated, and the continuous deepening of diversification strategy will also help smooth the fluctuation of the company's profits and improve the stability of development.
The company's short-term profit ushered in marginal improvement, the medium and long-term wood pulp self-sufficiency rate increased steadily, and the cost reduction and efficiency increase can be expected. Since the third quarter of 2021, with the gradual digestion of low-cost pulp inventory in the early stage and the high cost of raw materials, the profitability of the company in the third quarter of a single year has been under pressure, and the gross sales difference has decreased by 0.64pct year-on-year and 8.07pct month on month respectively. Looking forward to the future, in the short term, with the implementation of the company's high boom paper price increase letter, the pulp price decline is gradually reflected on the cost side, and the company's profitability is expected to be gradually improved. In the medium and long term, the company actively distributes upstream raw materials. According to the production time announced by the company, it is expected that the production capacity of the company's self-made special pulp may reach 750000 tons in 2024. It is estimated that the self-sufficiency rate of wood pulp will be increased from the current 9% to more than 50%, which will help to enhance the company's profit stability and increase profit space.
Optimize production technology, consolidate brand and customer advantages, and consolidate the company's long-term competitiveness. On the product side, the company continues to develop new products. At the same time, relying on its process advantages, it can realize the flexible conversion of paper machine equipment, which helps to respond to the changes of downstream demand in a timely manner. On the channel side, the company focuses on providing customers with one-stop, customized and comprehensive solutions, which are deeply bound with customers. At present, it has more than 2000 direct sales customers.
Profit forecast and investment suggestions
Based on the new project planning of pulp and paper announced by the company, we predict that the net profit attributable to the parent company will reach RMB 1.252/14.67/1.703 billion from 2021 to 2023. With the gradual implementation of forward-looking production capacity layout, the market share of the company is expected to increase steadily and the leading position in the industry will continue to be consolidated; On the cost side, new projects in Guangxi and Hubei will be put into operation in the future, which is expected to improve the company's self-sufficiency rate of wood pulp and increase the profit space. We adopted the DCF absolute valuation method to give the company a DCF target valuation of 51.18 yuan and maintain the "buy" rating.
Risk tips
The construction of new production capacity did not meet expectations; The decline of terminal demand exceeded expectations; Changes in assumptions affect the calculation results
