Zhongshun Jierou (002511) Commentary on Major Issues: Bamboo Pulp and Paper Integration Project Improves Industrial Layout, Employee Shareholding Plan Adds Motivation

Zhongshun Jierou (002511) Commentary on Major Issues: Bamboo Pulp and Paper Integration Project Improves Industrial Layout, Employee Shareholding Plan Adds Motivation

Matters: On July 9, 2019, the company announced that it plans to invest in the construction of a bamboo pulp and paper integration project to implement a bamboo pulp and paper integration production mode, reduce intermediate substitution, broaden the company’s profit margin, and become viable and sustainabledevelopment of.

On the same day, the company released the second phase of employee stock ownership plan (expenditure), and the price of part of the shares repurchased by the company’s special account under the employee stock ownership plan was 8.

08 yuan / share.

After the plan is approved by the shareholders’ meeting, the maximum number of shares is 50 million, and the maximum fund is 50 million yuan.

Comment: New bamboo pulp and paper integrated production project to promote industrial chain integration strategy.

Since the establishment of the company, the industrial chain has been in the middle and lower reaches of the tissue paper industry. A large amount of wood pulp demand depends on imports, and the company is greatly affected by the external environment.

The new bamboo pulp paper integration project is located in Lidu Industrial Park, Dazhou, Sichuan Province, with a total investment of 40.

8.7 billion, with an estimated total construction period of 70 months. After the project is fully completed, the annual profitability after tax is 2.

1.7 billion, return on investment in about 12 years.

In addition, the company will use “Sun” as a household paper brand for this project. The main raw material of the “Sun” brand is bamboo pulp.

We believe that the establishment of this project is a key change in the company’s overall strategic transformation. It can seek new profit growth points for the company, which is conducive to the company’s extension of the industrial chain and the promotion of brand strategy.

The employee stock ownership plan improves the benefit-sharing mechanism, binds the interests of senior management, and demonstrates the company’s confidence.

The budget limit for the funds raised under this plan is 50 million yuan, with “shares” as the subscription unit, each share is 1 yuan, and the maximum number of shares is 50 million.

The holders are company directors, senior management personnel and core backbone personnel, with a total of no more than 80 people.

The share price of the repurchased part of the company’s special account for repurchase is 8.

08 yuan / share.

We believe that the company’s re-release of the employee stock ownership plan can fully mobilize the enthusiasm of employees, effectively combine the interests of shareholders, the interests of the company and the interests of employees, improve the cohesion of employees and the competitiveness of the company, deepen the channels and ensure the long-term and stable development of the company.

Channel capacity goes hand in hand, and marketing incentives are beginning to show results.

1) Product: The company’s product positioning is high-end, with two brands “Jierou” and “Sun”. The main products are facial, lotion and natural wood products.

2) Channels: The three major channels of distribution / e-commerce / KA are fully developed, and there is still a lot of room for channel expansion. GT dealer channels are mainly expanding to the north, with weak competition among dealers and strong expansion capabilities.

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3) Production capacity: The country ‘s production capacity distribution is gradually consolidated and the future prospects are good: In 2019, the company ‘s Hubei and Tangshan will have 10 targets and 5 displacement production capacity respectively, which is expected to effectively increase the company ‘s market share in central and northern China, and the total production capacity is expectedIt will reach 81 with the aim of . 4) Marketing team: In 2015, the company introduced the Golden Red Leaf original marketing team to actively improve the “weak sales” situation. The marketing effect has improved. The employee stock ownership plan further motivates the sales team.

We maintain the company’s expected net profit attributable to mothers for 2019-2021.

05, 5.

96, 7.

40 ppm, corresponding to the current expected PE is 3杭州夜网0, 26, 21 times, respectively, maintaining the “strong push” level.

Zhongshun Jierou’s national-level capacity distribution is gradually consolidated. With reference to the market value of a domestically developed and mature domestic paper company, we maintain the company’s target market value of 150 billion yuan, corresponding to a target price of 12.

72 yuan, corresponding to 32 times PE in 2019.

Risk warning: The macro-downside consumption is sluggish, raw material prices rise, and exchange rate fluctuations increase.

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