\u3000\u3 China Vanke Co.Ltd(000002) 511 C&S Paper Co.Ltd(002511) )
Event:
The company released the 2021 annual report and the first quarterly report of 2022. In 2021, the revenue / net profit attributable to the parent company / net profit deducted from non attributable to the parent company were 9.15/5.8/570 billion yuan respectively, with a year-on-year increase of + 16.9% / – 35.9% / – 36.3% respectively; 4q2021 achieved revenue / net profit attributable to the parent company of RMB 2.875/97 billion respectively, with a year-on-year increase of + 26.8% / – 58.7% respectively. 1q2022 revenue / net profit attributable to the parent company / net profit deducted from non attributable to the parent company were RMB 1.88/1.3/130 billion respectively, with a year-on-year increase of – 10.4% / – 50.8% / – 52.5% respectively. The dividend plan for 2021 is to distribute cash dividend of 1.0 yuan (including tax) for every 10 shares.
Comments:
Optimize the product structure, seize the market demand and accurately develop new products: in 2021, by category, the revenue of household paper / personal care was 8.658/77 billion yuan respectively, with a year-on-year increase of + 15.5% / – 23.0%. We believe that the decline in the revenue of personal care business is mainly due to the stimulation of the epidemic in 2020 and a large number of mask sales in the company’s personal care business. In 2021, the epidemic in China was well controlled and the revenue of mask sales decreased. Seizing the market opportunity brought by the epidemic, the company has developed non-traditional dry towel products such as alcohol wet towel, sanitary wet towel, cleansing towel, compressed towel, disposable bath towel, mouthwash and mask, and defined high-end and high gross profit non-traditional dry towel as the strategic category of key development in the future. 1q2022, the company’s revenue fell year-on-year. We expect that it is due to the obstruction of logistics in March caused by the epidemic. Considering the replenishment of inventory by offline channels in the second quarter, we judge that the revenue of 2q company is expected to resume year-on-year growth.
Profit is under pressure, and the gross profit margin of Gehu has declined significantly: in 2021, the gross profit margin of the company increased from – 5.4pcts to 35.9% year-on-year, mainly due to the intensification of industry competition, the difficulty of raising product prices, and the rise of wood pulp and energy prices. By product, the gross profit margin of household paper / personal care was 37.0% / 40.7% respectively, with a year-on-year increase of – 5.1 / – 22.5pcts. The year-on-year rate is 2021.1% and 2021.1% respectively. By item, the rates of sales / management / R & D / financial expenses were 21.7% / 3.7% / 2.3% / – 0.1% respectively, with a year-on-year increase of + 2.0 / – 0.9 / – 0.1 / + 0.1pcts respectively. The increase of sales expense rate is mainly due to the intensification of industry competition. The company has increased the investment in product promotion and advertising.
1q2022, the company’s gross profit margin was – 7.7pcts to 32.8% year-on-year. By item, the rates of sales / management / R & D / financial expenses were 17.7% / 4.2% / 2.6% / – 0.1% respectively, with a year-on-year increase of – 0.9 / + 0.4 / + 0.4 / + 0.1pcts respectively.
The rise of pulp price is expected to slow down, and the products continue to be high-end for differentiated excess profits: since the fourth quarter of last year, the global wood pulp price has risen sharply. At present, the price of China’s broad-leaved pulp is 6022 yuan / ton, only one step away from the high point of 6300 yuan / ton of supply side reform in 2017. However, the prosperity of China’s bulk paper industry is significantly weaker than that in 2017. In April, the price of broad-leaved pulp in China fell by 107 yuan / ton month on month, ending the situation of rising for five consecutive months since November 2021. Although the decline in the price of broad-leaved pulp in April is related to the epidemic in China, we predict that the rising trend of pulp price is expected to slow down.
At the same time, the company continues to optimize the product structure, further strengthen the overall management of traditional paper towels, nursing supplies and health products, take the high-profit non-traditional dry towels as the strategic category of key development in the future, concentrate resources, increase the resource preference for high gross profit products such as oil paintings, lotion, kitchen paper towels, wet towels, wet toilet paper, facial towels, duoleimi sanitary towels and disposable products, and focus on high-end and differentiated products, Seek profitability beyond the industry.
There is still business pressure in the short term, the medium and long term are optimistic about the development prospects, and the “overweight” rating is given: we expect the EPS of the company to be 0.44/0.51/0.59 yuan respectively from 2022 to 2024, and the corresponding PE of the current stock price is 23 / 20 / 17 times respectively. We believe that in 2022, the world is in an inflationary environment. Under this background, it is difficult for China’s pulp price to decline significantly. The cost pressure is expected to run through the whole year. At the same time, the state of intensified industry competition is also difficult to reverse in the short term. It is expected that the company will continue to bear greater operating pressure. However, the company has previously proved its competitiveness in the high-end market. We believe that through the optimization and adjustment of product structure in 2022 and the reduction of cost side pressure in 2023, the company is expected to regain good growth. Considering the current valuation level of the company and the fact that the current industry is still under great operating pressure, the “overweight” rating is given for the first time.
Risk tip: the degree of industry competition exceeded expectations, and the price rise of wood pulp and energy exceeded expectations.
