Zhongshun Jierou’s history is absolutely excellent. From a net profit of 88 million in 2015 to an estimated net profit of 900 million in 2020, the net profit has increased by 10.22 times in five years. The stock price has increased from 2015 to 2020. From 2.91 yuan in 2020 to the highest price of 27.15 yuan in 2020, an increase of 9.32 times is almost in balance with the increase in net profit, which is a perfect fit: market value = net profit * valuation. As long as the company's net profit continues to grow while the valuation remains reasonable, the stock price will continue to rise.
Company introduction:
The compound growth rate of operating income from 2015 to 2019 reached 22.37%, and the compound growth rate of net profit attributable to the parent company from 2015 to 2019 reached 62.06%. Driven by factors such as product structure adjustments, falling pulp prices, and value-added tax cuts, the company's net profit growth rate was significantly higher than revenue growth.
Since its listing, the company’s performance has always maintained positive growth. The main reason is that after the introduction of a new marketing team in 2015, the company actively adjusted its product structure and increased its sales promotion efforts for high-margin products such as Clean Face and Clean Lotion. The revenue share of non-roll paper products increased rapidly after 2015, rising from 52% in 2015 to 61% in 2018. The gross profit margin of non-rolling paper products is about 10pct higher than the gross profit margin of rolling paper products.
The two rounds of equity incentive plans have been overfulfilled, and the financial data continues to improve:
In addition, after 2015, the company expanded the size of its sales staff and increased incentives for sales staff. Two equity incentive plans were formulated. In October 2015, the company launched the first phase of the equity incentive plan (the company’s non-net profit and operating income growth rates in 2018 increased by 501.21% and 125.18% respectively compared with 2014, which was higher than the assessment 352% and 83% of the standard conditions). In December 2018, the company launched the second phase of the equity incentive plan (the assessment standard is based on the operating income in 2017, and the operating income growth rate in 2019, 2020 and 2021 is required to be no less than 41.60% , 67.09%, 94.03%), and the assessment rules formulated each time are relatively high. The revenue plan of nearly doubling in three years has been overfulfilled in the first time and will still be overfulfilled in the second time. Overall, although sales expenses The rate is rising year by year, but the company's expense rate is declining, gross profit margin and net profit margin are rising year by year, and ROE and asset turnover rate are also continuing to increase. Of course, this is also coupled with the favorable factors of low upstream pulp prices and value-added tax reductions.
The company's four major sales channels have developed together, and strong marketing has enhanced brand competitiveness:
Before 2015, the company only had a single dealer channel, and the company implemented the policy of "emphasis on products, light on marketing" strategy. In 2015, the company introduced the core sales team of the original Jinhongye to carry out marketing and channel reforms, and increased investment in channel construction and marketing. It has expanded from a single dealer channel before 2015 to a development model with four major channels: GT, KA, AFH and EC. In 2018, in response to consumption upgrades and the new era of mobile internet, the company successively expanded maternal and infant and new retail channels, becoming a new driving force for profit growth. Compared with competitive companies, the company has grown rapidly in channels other than GT. Its diverse sales channels and excellent product quality have contributed to the company's sustained and rapid sales growth.
The production capacity distribution is becoming increasingly perfect, and the national layout is beginning to take shape:
With the completion and commissioning of the Tangshan Zhongshun production base, the company has filled the production capacity gap in North China and basically formed a network covering South China. , the production capacity layout in the five major regions of Southwest, East China, Central China and North China. The company's production capacity in 2019 will be around 800,000 tons, and it is expected to add 100,000 tons of production capacity each year in the next 3-5 years. Judging from the current production capacity planning of each base, the company's future target production capacity is about 1.5 million tons. In recent years, the company's production capacity growth rate has been higher than that of its peers. Corresponding to this is the company's continuous category expansion and gradual increase in market share. Maintaining a high growth rate in production capacity will help the company expand its business and seize more market share.
Catalysts for the development of the household paper industry:
1. Demand side: The long-term steady growth of the industry is positively related to per capita GDP
In recent years, as our residents With the improvement of living standards, household paper consumption has shown a steady growth trend. Data show that in 2019, my country's household paper consumption reached 9.3 million tons, a year-on-year increase of 3.22%, and the growth rate was higher than in 2018. From 2013 to 2019, my country's total household paper consumption increased from 7.34 million tons to 9.3 million tons, with a CAGR of 4%. At the same time, my country's per capita annual consumption of household paper has also increased from 4.20kg in 2012 to 6.64kg in 2019, with a CAGR of 6.8%. In addition, my country's total population is still growing, and the huge population size has also created a broad demand market for the household paper industry.
Tissue paper is a rigid consumption, which also determines that the cyclicality of the household paper industry is low, and as the per capita GDP growth rate increases, the annual per capita consumption of household paper will gradually increase, according to the data It shows that the per capita annual household paper consumption in developed countries such as Sweden and the United States is more than 20kg, while the per capita annual household paper consumption in Japan and South Korea, both in East Asia, is also more than 15kg. With the continuous expansion of my country's population (the population is still Maintaining positive growth), increasing hygiene awareness and upgrading consumption, the penetration rate of household paper (especially non-roll paper) will become higher and higher in the country. Compared with developed countries such as Japan, South Korea, Europe and the United States, my country's per capita consumption of household paper is at least still There is about 3 times the room for improvement.
2. There is still room for improvement in industry concentration
In terms of corporate competition, from 2018 to 2019, the market share of the two major brands Xinxiangyin and Vinda was 9% The above-mentioned brands are in the first echelon of competition in the household paper industry; followed by the two major brands of Clean and Breeze, whose market share is between 5% and 6%. According to production capacity statistics, CR4 (Golden Hongye Qingfeng, Heng Anxin Xiangyin, Vinda, Zhongshun Jierou) accounted for a total of approximately 33% in 2019; while the CR4 share of household paper in the United States has exceeded 70%. By comparison, my country Leading companies still have a lot of room for growth. (There are several versions of CR4’s share, but they all indicate that there is a big gap in industry concentration between China and the United States)
Overview of household paper companies in 2019
The industry has been in the range of production capacity > output >Consumption status, and the gap between production capacity and output has continued to expand from 2015 to 2017, causing capacity utilization to continue to decline. After 2017, due to the tightening of environmental protection policies, the Ministry of Environmental Protection issued a series of environmental protection measures such as the National Environmental Protection Standards. Coupled with the rise in pulp prices, the increase in the proportion of mid-to-high-end demand, and the need for companies to invest more funds, etc. Cost pressure on local small and medium-sized enterprises has increased, backward production capacity has been withdrawn from the market at an accelerated pace, leading enterprises have increased their investment in modern production capacity, industry capacity utilization has rebounded, and industry concentration is expected to further increase. The US household paper industry is relatively concentrated at the head. The main reason is that high-standard environmental policies have prompted the liquidation of small and medium-sized enterprises.
Overall, from the perspective of industry concentration, my country's leading household paper companies still have room for growth. As environmental protection policies become stricter, backward production capacity will be replaced, and leading companies are expected to rely on technology, scale and production capacity. With other advantages to further seize market share, CR4 in the industry will continue to improve in the future.
Company valuation and market value target
In recent years, the company has carefully shaped its products, increased investment in marketing, channels, etc., and its profitability has increased year by year. In the future, it is expected that with the gradual release of production capacity and the expansion of new categories, the company's performance is expected to maintain high growth.
As of October 19, 2020:
The number of followers of Zhongshun Jierou Tmall flagship store is 2.48 million, and the number of followers on JD.com is 10.36 million;
Vinda Tmall flagship store has 5.24 million followers and 18.613 million;'
Qingfeng Tmall flagship store has 4.04 million followers and JD.com has 11.651 million followers
Xinxiangyin Tmall flagship store has followers 1.89 million people + 575,000 Hengan Living Center, 9.761 million followers on JD.com;
According to the brokerage forecast and historical valuation, a valuation of 30-37 times can be given, and the target market value corresponding to the brokerage forecast net profit in 2021 It is 32.6 billion-40.2 billion, corresponding to the target market value in 2022 is 38.7 billion-47.8 billion. The current market value is 28.6 billion, which corresponds to a valuation of 31 times in 2020. It is in the historical middle and the valuation is reasonable. You can buy it gradually. If the market value drops below 25 billion, it will be an excellent opportunity. The corresponding stock price is 18.5-19.5 yuan. After buying it, holding it for a long time is a sure win. The extreme market value is 23 billion, which corresponds to a stock price of about 17.5.