\u3000\u3 Bohai Water Industry Co.Ltd(000605) 377 Hangzhou Huawang New Material Technology Co.Ltd(605377) )
Main points:
China’s leading enterprise of medium and high-end decorative base paper. The company is a leading enterprise of medium and high-end decorative base paper in China. Its main business can be divided into printable and plain decorative base paper. Its product matrix is rich, with more than 400 product categories, and its terminal applications are artificial board furniture, flooring, etc. From 2016 to 2021, the company’s revenue CAGR was 16.9%, and the net profit attributable to the parent company CAGR was 34.77%. In 2021, the company’s decorative base paper production capacity will be 220000 tons, ranking the third in the industry. It is expected that the production capacity will reach 350000 tons in 2023.
The pattern is excellent, and the scale of the industry continues to expand. In 2020, the scale of China’s decorative base paper market was RMB 114.8 billion, with a sales volume of 113000 tons, and the sales CAGR in nine years was 10.9%. Decorative base paper has high capital and technical barriers and high industry concentration. In 2021, China’s decorative base paper CR3 accounted for 72%. High end becomes the development trend of the industry: the performance of high-end products is more stable, and there are three driving forces for future growth: 1) the accelerated development of terminal needs such as fine decoration and old house reconstruction; 2) The export scale continues to expand, improve the penetration rate in Asia, and enter the European market at the same time; 3) Expand the scope of application, including the innovation of substrate and veneer and the broadening of application scenarios.
The equipment and process industry are leading, and the cost advantage is obvious. In 2020, the company’s gross profit per ton was 2736 yuan / ton, higher than the industry average. 1) the company has certain bargaining power. At the company level: high technical barriers and product quality lay an industry position, which can realize rapid response to downstream demand and stable supply of high quality. It is one of the few enterprises in the market that can not only master the core technology, but also have the mass production capacity of customized products. Industry level: the supply and demand pattern continues to improve, and the high concentration improves the leading synergy; 2) Lower cost: the capacity expands rapidly, the scale effect is significant, the large-scale centralized mining suppresses the fluctuation of raw materials, and the unit cost is lower.
The valuation has a margin of safety, and the company is in a growth period. At present, pe-ttm is lower than the quartile since listing, and the valuation has a margin of safety. In the short term, the company’s scale effect brings cost advantages, superimposed price increase and capacity release, and the volume and price of 22h1 rise simultaneously, which has the dual driving force of high profit increase and valuation repair; In the long run, the high-end trend of the industry remains unchanged. The company has multiple advantages such as brand, product power, customer resources and scale. With the implementation of Ma’anshan phase II production capacity, it is expected to continue to improve its market share. It is estimated that the company’s net profit attributable to the parent company in 22-23 years will be RMB 492 / 617 million respectively, with a year-on-year increase of 9.6% / 25.4%. For the first time, it will be given a PE of 15x in 2022 and a “buy” rating.
Risk tips: the price of raw materials fluctuates sharply, the industry competition intensifies, the production capacity is less than expected, the overseas trade environment deteriorates, and there is a risk of repeated epidemics.
