\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 966 Shandong Bohui Paper Industry Co.Ltd(600966) )
Event:
The company released its annual report for 2021. The company achieved revenue / net profit attributable to the parent company of 16.28 billion yuan and 1.71 billion yuan respectively, with a year-on-year increase of +16.4%/+104.5% respectively; 4q2021 achieved a revenue / net profit attributable to the parent company of RMB 4.34 / – 210 million respectively, with a year-on-year revenue of – 6.8%. In 2021, the company realized a net operating cash flow of 3.64 billion yuan.
Comments:
The price of white cardboard continued to fall, resulting in a loss in the fourth quarter: in 2021, the company achieved a paper sales volume of 3.126 million tons, compared with 3.117 million tons in 2020, a year-on-year increase of + 0.3%. The growth of the company’s sales revenue in 2021 was mainly driven by the rise of paper price. In terms of products, the revenue of white cardboard / cultural paper / box board paper was RMB 12.51/15.7/1.59 billion respectively, with a year-on-year increase of + 13.6% / + 61.2% / + 20.9%, of which white cardboard accounted for 76.8% of the overall revenue. The average revenue of the consulting company was driven by the average price of + 747 tons of kraft paper in 2021, which was driven by the average price of kraft paper in 2021. According to Zhuo Chuang consulting, the average price of 1q / 2q / 3Q / 4q2021 white cardboard was 8422 / 9107 / 6169 / 6019 yuan / ton respectively, with a year-on-year change of + 42.2% / 65% / 6.3% / – 11.2% in each quarter of 2020. The price of white cardboard fell year-on-year in 4q2021, resulting in a negative growth in the revenue of 4q2021 company. At the same time, due to the continuous decline of white card price and the rise of energy cost, Bohui’s profit end suffered a loss in 4q2021. The average price of 1q2022 white cardboard is 6115 yuan / ton. On April 14, 2022, the average price of white cardboard is 6450 yuan / ton. The price of white cardboard has increased compared with 4q2021. We believe that the fundamentals of the company have reached the bottom in 4q2021.
The decline in paper prices and the rise in energy costs led to a decline in gross profit margin, a significant reduction in financial expenses and a reduction in the period cost rate: the company’s gross profit margin was 22.9% in 2021, a year-on-year increase of + 5.8pcts. In terms of products, the gross profit margin of white cardboard / cultural paper / box board paper was 28.2% / 4.8% / 3.1% respectively, with a year-on-year increase of + 5.9 / + 6.6 / + 6.4pcts. The rising price of white cardboard is the core driving force driving the rise of gross profit margin.
In terms of period expense rate, it was 8.2% in 2021, with a year-on-year increase of -0.8pcts. Among them, the rates of sales, management, R & D and financial expenses were 0.4% / 3.3% / 3.4% / 1.0% respectively, with a year-on-year increase of + 0.1 / + 0.7 / + 1.4 / – 3.1pcts. The increase in management expense rate was due to the company’s increased incentive to the management, resulting in an increase in salary. The increase in R & D expense rate was due to the company’s increased R & D investment and improved competitiveness; The significant reduction in the financial expense rate is the result of the company’s management optimizing the financial structure and reducing the debt level. In 2021, the company’s asset liability ratio decreased from 68.7% in 2020 to 63.5%.
The improvement of import and export boosted the prosperity of the industry, and the substitution of paper for plastic helped the long-term growth prospects of white card: from January to February this year, China’s white card paper showed a good export momentum thanks to the rise of overseas energy costs, especially in Europe, and the recovery of demand. According to customs data, from January to February, China’s total net exports of white cardboard and whiteboard were 455000 tons, an increase of 326000 tons over the same period last year, close to 50% of China’s total exports of 979000 tons of white cardboard and whiteboard in 2021. The improvement momentum was extremely significant, which effectively boosted the prosperity of China’s white cardboard industry. Although the average price of 1q2022 white cardboard was 6115 yuan / ton, an increase of nearly 100 yuan / ton compared with 4q2021, the price of white cardboard accelerated after the year, At present, it has reached 6450 yuan / ton, which is expected to help the company improve its performance month on month in the first half of 2022.
We believe that 4q2021 and 1q2022, Shandong Sun Paper Co.Ltd(002078) parent company and Shandong Bohui Paper Industry Co.Ltd(600966) parent company app group have invested 900000 tons of white cardboard capacity respectively, and app plans to invest and build the second 900000 tons of white cardboard machine in the second half of 2022, which will inevitably lead to the industry falling into the state of oversupply in the short term. However, replacing plastic with paper and internal circulation will effectively drive the long-term growth prospect of white cardboard. We are still optimistic about the white cardboard track in the medium and long term.
Repurchase shows the confidence of the company’s management in the medium and long-term development of Shandong Bohui Paper Industry Co.Ltd(600966) project: on March 31, 2021, the company announced that it would repurchase the company’s shares at a price of no more than 24.97 yuan / share with its own funds and self raised funds of no less than 1 billion yuan and no more than 2 billion yuan for the implementation of employee stock ownership plan or equity incentive. As of March 31, 2022, the company has accumulated 659 million yuan of funds and repurchased 53.67 million shares, with an average repurchase price of 12.28 yuan / share. The company still needs to repurchase at least 341 million yuan. We believe that large amount of repurchase constitutes a strong incentive for the management, and also demonstrates the management’s confidence in the medium and long-term development of Shandong Bohui Paper Industry Co.Ltd(600966) project.
Fundamentals are expected to usher in an inflection point in 1q2022. Pb is lower than the historical average and is given a “buy” rating: we expect the company’s EPS from 2022 to 2024 to be 0.96/1.19/1.46 yuan respectively, and the corresponding PE of the current stock price is 9 / 7 / 6 times respectively. According to wind data, since 2017, Shandong Bohui Paper Industry Co.Ltd(600966) historical average of Pb (MRQ) has been 1.8 times, and at present, the company’s Pb is 1.6 times (MRQ), which has been lower than the historical average. Moreover, 1q2022, the company’s fundamentals are expected to benefit from the improvement of export boom, and its profit has ushered in an inflection point. At the same time, with the effect of the follow-up national steady growth policy, the macroeconomic upward trend will drive the boom of the whole paper sector to pick up, cover it for the first time, and give the company a “buy” rating.
Risk tip: China’s macro-economy is lower than expected, and the prices of wood pulp and thermal coal are higher than expected.
