\u3000\u3 China Vanke Co.Ltd(000002) 078 Shandong Sun Paper Co.Ltd(002078) )
Core view
Event: the company announced that in the first quarterly report of 2022, the company realized an operating revenue of 9.667 billion yuan in 2022q1, with a year-on-year and month on month increase of 26.48% and 16.73% respectively; The net profit attributable to the parent company was 675 million yuan, a year-on-year decrease of 39.08% and a month on month increase of 258.05%.
The performance of 2022q1 exceeded expectations, and the profitability and turnover efficiency were significantly improved month on month. In 2022q1, the net profit attributable to the parent company in a single quarter increased by 258% month on month to 675 million, exceeding market expectations. It is speculated that the main reason is the outstanding contribution of dissolved pulp products. In 2022q1, the company’s annualized roe in a single quarter was 14.1%, increased by 10.1pct month on month, significantly improved profitability and turnover efficiency, net profit margin was 7.0%, increased by 4.7pct month on month, and the total asset turnover rate also increased significantly month on month.
Benefiting from the high price of pulp, it is speculated that dissolved pulp is the key source of profit increment contribution in 2022q1. With Guangxi phase I 1.67 million tons of pulp and paper production capacity project put into operation before the end of 2021 (including 550000 tons of cultural paper, 120000 tons of household paper, 800000 tons of chemical pulp and 200000 tons of chemical mechanical pulp), the company’s pulp and paper production capacity increased by 23% to more than 10 million tons, and the release of new production capacity contributed to the increment of 2022q1. Benefiting from the high pulp price, we speculate that the profit expansion brought by the rapid rise of dissolved pulp price may be the main source of profit increment in 2022q1.
The quarterly improvement trend continues, and the medium and long-term growth is sufficient. The company’s Guangxi phase I pulp and paper production capacity of 1.67 million tons has been put into operation successively before the end of 2021. In addition, Shandong Honghe 34000 tons of ultra-high strength special paper and Guangxi Beihai 150000 tons of household paper phase I projects are planned to be put into operation in the second half of 2022. The release of new production capacity is expected to continue to contribute to the increase in 2022. At the end of February 2022, the company announced that it plans to open the layout of Nanning through the acquisition of 1.5 billion yuan, and plans to invest 20 billion yuan to build a new 5.25 million ton Forest Pulp paper integration project. Nanning base is expected to further open the ceiling of the company’s growth and form synergy with Shandong, Guangxi Beihai and Laos. Considering that under the conflict between Russia and Ukraine, the supply side of the global pulp and paper industry is still affected by the tight supply of needles in Russia, the high energy price in Europe and the delay of maritime logistics, it is expected that the pulp price will continue to fluctuate at a high level in the first half of the year, the price of cultural paper will still have room to rise driven by the cost, the profit of dissolved pulp is also expected to maintain above the historical median level, and the improvement trend of the company’s fundamentals month by month and quarter by quarter is expected to continue.
Profit forecast and investment suggestions
According to the conservative prediction, the net profit attributable to the parent company from 2022 to 2024 will reach RMB 3.013/31.40/3.740 billion (maintaining the previous prediction), the corresponding BPS will be RMB 8.37/9.53/10.93 respectively, and the roe will reach 14.6% / 13.1% / 13.6%. Combined with the Pb valuation range corresponding to the historical roe, the target valuation of 2022 is 1.9 times Pb, with the corresponding target price of 15.90 yuan, maintaining the “buy” rating.
Risk tips
Economic growth slowed down and terminal demand fell faster than expected; The company’s new pulp and paper project fails to meet the expected risk
