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Nine Dragons Paper: continuously put waste paper into production capacity, reduce leading advantages and consolidate

release date: 2020 - no guarantee that the sensors and other parts of the equipment will not be damaged source: flush Financial Research Center Views: 2335 copyright and disclaimer

core tip: on March 30, CSC released the Research Report on Nine Dragons Paper. The summary is as follows: Event: on March 23, 2020, the company issued the semi annual report for fiscal year 2019/2020, Events of the company in the half year of 2019/2020 fiscal year: on March 23, 2020, the company released the semi annual report of 2019/2020 fiscal year. The company achieved a total operating revenue of 28.836 billion yuan in the half year of 2019/2020 fiscal year, a year-on-year decrease of 4.99%; The net profit attributable to the parent company was RMB 2.279 billion, a year-on-year increase of 0.52%

the company's performance is in line with expectations

our analysis and judgment

the overall performance is stable, the volume and price rise is slow, and the profitability is expected to rebound

the company achieved a total operating income of 28.836 billion yuan in the first half of fiscal 2019/2020, a year-on-year decrease of 4.99%; The net profit attributable to the parent company was RMB 2.293 billion, a year-on-year increase of 0.38%

the gross profit margin increased from 15.7% to about 17.1%. The experimental results were automatically saved to the database, increasing by 1.4pct, mainly because the cost of waste paper raw materials fell faster than the price of products during this period. During the reporting period, the sales growth of the company's paperboard, high-strength corrugated paper and coated gray bottom whiteboard was 9.1%, 20.0% and 24.6% respectively. The company's overall total sales volume was 8.5 million tons, a year-on-year increase of 13.3%. However, the lower sales unit price led to a year-on-year decrease of 4.99% in overall sales

in terms of products, in the first half of 2019/2020 fiscal year, the company achieved 248 operating income from sales of packaging paper business. The design, prototype and test research process of new carbon fiber materials was 10 points slow 9. The entry of water and air (hydrolytic stability, anti emulsification, anti foaming and air release) is 100million yuan, accounting for 86.32% of the total operating revenue. The company's packaging paper business is an important source of revenue. Environmental friendly cultural paper ranked second, with an operating income of RMB 3.388 billion during the reporting period, accounting for 11.75% of the operating income. The remaining operating income was contributed by the sales of high priced special paper products and wood pulp, accounting for 1.59% and 0.34% respectively. The company's packaging paper business accounted for a stable proportion and became the core category

production capacity has been released steadily. The vertical layout of the industrial chain

. Domestic production capacity accounts for more than 90% of the total production capacity. In terms of the number of papermaking/pulping machines, the number of machines in China also accounts for about 75.00%-100.00%. In addition, Vietnam and the United States have also contributed some capacity to the company

2019, the company will expand the capacity of paperboard and recycled pulp in Shenyang, Quanzhou and Malaysia, with annual capacity of 600000 tons, 350000 tons and 480000 tons respectively. In addition, the company plans to continue capacity base expansion in Hebei, Dongguan and Malaysia in 2020. The main products are packaging paper products. The designed annual capacity is 500000 tons, 600000 tons and 550000 tons. Except that Malaysia is expected to be put into operation at the end of 2021, Hebei and Dongguan are expected to be put into operation in Q1 2020. We expect that the company's new capacity in recent years and future production capacity will be gradually released. We plan to take precautions against changes in market supply and demand to bring capacity advantages to the company

meanwhile, the company's future capacity expansion will mainly focus on overseas high-quality raw materials and domestic downstream paper mills. With the continuous deepening of the layout, the impact of the decline in us waste imports on the company's raw material side is expected to be gradually mitigated

the foreign waste policy continues, and the expected reduction of import quota is expected to bring flexibility. Affected by the stricter waste paper import policy, the approved amount of foreign waste import in 2017, 2018 and 2019 was 2811, 1815 and 10.75 million tons respectively, a year-on-year decrease of 26%, 35% and 41%. In 2020, the approved amount of the first three batches of foreign waste imports totaled 3213600 tons, a year-on-year decrease of 41.86%. We expect that the total amount of the whole year will decrease by 40%-50% year on year in 2020

based on the clear goal of clearing the quota of foreign waste by the end of 2020, we expect that the supply and demand of the industry will become tense, and the future waste paper price is expected to stabilize and rebound

at the same time, industry leaders have gained greater cost advantages by virtue of waste raw materials and their own production scale, promoting the further increase of industry concentration

investment suggestions:

we predict that the operating revenue of Nine Dragons Paper in fiscal years 2019/2020 and 2020/2021 will be RMB 50.814 billion and 54.264 billion respectively, with a year-on-year increase of -7.26% and 6.79%; The net profit attributable to the parent company was RMB 3.687 billion and RMB 4.108 billion respectively, with a year-on-year increase of -4.47% and 11.43%; The corresponding p/e is 8.6x and 7.7x, and the "overweight" rating is given for the first coverage

risk tips:

the impact of the epidemic exceeded expectations, the impact of raw material price fluctuations, intensified industry competition, etc

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