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Zhongshun Jierou (002511): Attack of the tissue faucet on the giant

Zhongshun Jierou (002511): Attack of the tissue faucet on the giant

Leading tissue companies are growing fast and attacking industry giants.

Zhongshun Jierou is the first echelon member in the tissue industry (the top four companies in the domestic tissue market are APP, Hengan, Vinda, and Jierou).

The company owns two brands: Jierou and Sun.

The profitability of the new secretary-general improved significantly in 2014 after he arrived.

From 2014 to 2018, the company’s main business income was 25.

200 million to 56.

800 million, CAGR is 22.

5%; net profit attributable to mother increased from 67.5 million yuan to 4.

100 million, CAGR is 56.

7%.

The company achieved revenue of 15 in Q1 2019.

40,000 yuan, an increase of 25 in ten years.

8%; net profit attributable to mother 1.

23 ppm, an increase of 25 in ten years.

2%.

The company’s products continued to upgrade, and the proportion of non-roll paper products with high gross profit margins continued to increase, driving the gross profit margins to continue to rise.

In March 2019, the company launched the second phase of the equity incentive plan, and its revenue guidance for 2021 refers to its 10 billion target.

Industry side: 100 billion market value incubators, downward pressure on pulp prices has prompted the release.

The tissue paper industry has a CAGR of over 10% in the past ten years.

We judge that the industry scale is expected to approach 300 billion yuan in 2030 based on the logic of increasing per capita consumption and consumption unit prices.

In terms of industry structure, unlike other fast-moving consumer goods, tissue paper has become the main attack direction of international giants when they first entered China, providing a hotbed for the growth of domestic brands.

With reference to the United States CR3> 60%, we judge that domestic tissue paper is trying to create enterprises with urban proportions exceeding 20%.

We believe that the long-term net margin is expected to stabilize above 8%.

The industry peer Hengan International is expected to estimate about 20 times.

In summary, we believe that the industry may incubate 100 billion market caps in the long run.

In the short-term logic, corporate profitability is highly inversely related to pulp prices.

We judge that due to the gradual reduction of demand in the Chinese market, the global wood pulp supply and demand balance may be broken, resulting in an increase in pulp prices.

Cost pressure on tissue companies is expected to be released.

Product structure transformation has achieved initial results and maximized industry dividends.

The CAGR of toilet paper consumption in 2012-2022 is 5.

1%, CAGR of non-toilet paper is 10.

8%, the core growth driver of future tissue paper lies in product upgrades.

At the same time, Zhongshun Jierou non-rolled paper high-margin products accounted for 50% in 2014.

4% to 57 in 2017.

4%, the company’s high-end product line accounted for more than 60% of revenue in 18 years.

Zhongshun Jierou, which has made initial progress in structural transformation and upgrading, is expected to use the first-mover advantage card slot to convert the industry dividend.

The distribution channel dividends are yet to be released. The stores and e-commerce channels have significant advantages.

In the long run, under the circumstances that the attributes of consumer paper are unchanged, the final industry shape will be determined by the number of users covered by each enterprise.However, the proportion of the population covered by provincial capitals to county-level cities only accounts for 34%. However, the coverage of fast-moving consumer goods companies also stops at this level, and two-thirds of the potential market has yet to be rolled out.

The number of company dealers increased from 300 in 2014 to more than 2,000 in 2018, and the company is increasing its coverage. We believe that Jierou’s investment and replacement in channel expansion is the leading peer.

Due to the company’s enhanced product competitiveness and direct operation of supermarkets, the growth rate of e-commerce channels also takes precedence over peers Vinda 苏州夜网论坛 International.

Profit forecast and investment advice: We predict that the company will realize net profit attributable to mothers in 2019-2021.

60, 6.

87, 8.

32 ppm, a 37-year increase.

65%, 22.

63%, 21.

12%, EPS is 0.

43, 0.

53, 0.

64 yuan, maintain “Buy” rating.

Risk reminders: expansion of channels, category adjustments exceed expected risks; intensified competition in the industry, leading to profit risks caused by the decline in the industry’s gross profit margin and net profit margin; upward cost risks caused by rising raw material prices and exchange rate changes.