\u3000\u3 Bohai Water Industry Co.Ltd(000605) 007 Quzhou Wuzhou Special Paper Co.Ltd(605007) )
Key points
Event:
The company released the 2021 annual report and the first quarterly report of 2022. The revenue / net profit attributable to the parent company in 2021 were 3.69 billion yuan and 390 million yuan respectively, with a year-on-year increase of + 40% / + 15.2% respectively; 4q2021 achieved revenue / net profit attributable to the parent company of RMB 1.01/80 billion respectively, with a year-on-year increase of + 53% / – 19.5% respectively. 1q2022 achieved revenue / net profit attributable to the parent company of RMB 1.33 billion / 103 million respectively, with a year-on-year increase of + 74.9% / – 8.7% respectively. The dividend plan for 2021 is to distribute cash dividend of 3.0 yuan (including tax) for every 10 shares.
Comments:
Revenue and net profit reached a new high in 2021: in 2021, the company sold 585700 tons of special paper, a year-on-year increase of + 35.1%. By product, the revenue of food packaging paper / gracine paper / transfer printing paper / tracing paper was RMB 17.47/10.06/2.62/96 million respectively, with a year-on-year increase of + 17.8% / + 13.8% / + 80.6% / + 38.0%.
In 2021, the average selling price per ton of food packaging paper / gracine paper / transfer printing paper / tracing paper was 6382 / 7448 / 6199 / 13077 yuan respectively, with a year-on-year increase of + 13.4% / + 16.2% / + 12.8% / + 5.2%; In addition, the price of special cultural paper per ton is 4434 yuan. In 2021, the company’s net profit per ton of paper was 666 yuan, a decrease of 115 yuan compared with 781 yuan per ton of paper in 2020.
1q2022, benefiting from the 500000 tons of food cardboard capacity put into operation at the end of 2021 and the 300000 tons of special cultural paper capacity put into operation in 2021 (3q2021 put into operation), the company’s sales revenue increased significantly. We estimate that the sales volume in the quarter was 230000 tons, a year-on-year increase of + 64%, and the net profit per ton of paper was 448 yuan.
The rise of pulp price and energy cost affects the profit performance, and the cost rate is well controlled during the period: in 2021, the company’s gross profit margin increased from – 5.9pcts to 17.3% year-on-year, which is mainly affected by the rise of wood pulp and energy cost and the adjustment of transportation fee to the cost side. If the transportation fee in 2020 is adjusted to the cost side, the company’s gross profit margin in 2021 will be -1.7pcts year-on-year. By product, the gross profit margin of food packaging paper / gracine paper / transfer printing paper / tracing paper was 25.5% / 16.5% / 3.0% / 26.5% respectively, with a year-on-year increase of + 2.7 / + 3.3 / – 8.0 / – 11.3pcts respectively.
We believe that the company’s gross profit margin increased to – 6pcs 12.025% on a quarter on quarter basis, but the company’s gross profit margin increased to – 6pcs 16.025% on a quarter on quarter basis.
In 2021, the period expense rate was 4.3%, with a year-on-year increase of -2.7pcts. By item, the rates of sales / management / R & D / financial expenses were 0.2% / 1.6% / 1.5% / 1.0% respectively, with a year-on-year increase of – 4.1 / – 0.2 / + 1.0 / + 0.5pcts respectively.
1q2022, the period expense rate was 5.4%, year-on-year -2.3pcts. By item, the rates of sales / management / R & D / financial expenses were 0.1% / 1.3% / 2.1% / 1.9% respectively, with a year-on-year increase of – 3.9 / – 0.2 / + 1.5 / + 0.3pcts respectively. The expense rate decreased, on the one hand, because the transportation fee in the same period last year was still listed in the sales expense, on the other hand, the company’s 1q revenue increased significantly this year, and the scale effect reduced the expense rate during the period.
The excellent competition pattern ensures the implementation of price increase, and the performance is expected to improve quarter by quarter: according to our statistics on the capital expenditure of Chinese listed special paper enterprises in the first three quarters of 2021, at present, there are only Quzhou Wuzhou Special Paper Co.Ltd(605007) , Xianhe Co.Ltd(603733) and Hangzhou Huawang New Material Technology Co.Ltd(605377) three enterprises in the industry are expanding their production capacity, while the rest of the peer companies basically stop expanding their production capacity. At the same time, only Quzhou Wuzhou Special Paper Co.Ltd(605007) and Xianhe Co.Ltd(603733) among the listed special paper enterprises in China have a capacity of more than one million tons, and have formed a large capacity scale advantage over other listed special paper enterprises. In addition, Quzhou Wuzhou Special Paper Co.Ltd(605007) and Xianhe Co.Ltd(603733) have also begun to layout the forest and pulp in the upstream of the industry, which will further open the gap with the industry in the future. We believe that China’s specialty paper industry will form an excellent competition pattern in which Quzhou Wuzhou Special Paper Co.Ltd(605007) and Xianhe Co.Ltd(603733) enterprises will continue to lead and control the industry.
Since the beginning of this year, China’s special paper industry has carried out three rounds of price increases, which were respectively in mid February, March and early April. At present, it is expected that two rounds of price increases will still be carried out in May and June. We believe that with the gradual implementation of price increases and the weakness of pulp prices in April, the gross profit margin of 2q2022 is expected to increase significantly month on month, and the probability of 3q2022 will continue to increase month on month, The performance of China’s special paper industry showed a quarter on quarter rise.
The performance is expected to improve month on month and maintain the “buy” rating: given that the company’s current sales situation is better than our previous expectations, we raised the company’s revenue from 2022 to 2023, and raised the company’s EPS forecast from 2022 to 2023 to 1.34/1.77 yuan respectively (up 2.3% / 5.4% respectively compared with the previous forecast), increased the EPS forecast for 2024 to 2.29 yuan, and the current share price corresponding to PE is 10 / 8 / 6 times respectively. We believe that the company’s performance in the first quarter of this year is at the bottom. With the continuous implementation of price increases, the company’s performance is expected to improve quarter by quarter. At the same time, the company’s current valuation level has been less than twice peg and maintains the “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.
