#### Sun Paper (002078) Company Comments： Performance Improves Quarterly, Endogenous Power Is Strong

Sun Paper (002078) Company Comments: Performance Improves Quarterly, Endogenous Power Is Strong

Event: Sun Paper released the third quarter of 2019 report, and the company achieved revenues of US $ 16.4 billion in the first three quarters of 2019, which increased by one.

8%; realized net profit of return to mother 14.

9 ‰, an average of 17 in ten years.

6%; net profit after deduction of non-return to mother 14.

60,000 yuan, an average of 18 years.

1%.

In the third quarter alone, the company achieved revenue of 56.

20,000 yuan, ten-year average of 0.

2%; net profit attributable to mothers was 60,000 yuan, a year-on-year increase of 4.

4%; net profit after deduction is 5

9 ‰, an increase of 4 in ten years.

4%.

The profit of cultural paper has gradually improved, and the gross profit margin has improved quarter by quarter.

The company’s consolidated gross profit margin for the first three quarters of 2019 was 21.

1% for more than ten years.

5 points.

Q1 / Q2 / Q3 gross profit margins were 17 respectively.

7% / 21.

8% / 23.

8%, 9 years ago.

8pct / vein 4.

6pct / increase 0.

7 points.

The gross profit margin showed a trend of improvement quarter by quarter.

In our judgment, the core reason lies in the preliminary restoration of ton surplus in the cultural paper industry in the third quarter.

As for finished paper, the average price of coated paper in the third quarter was 5,541 yuan / ton, each time falling by 18.

7% (-1277 yuan / ton), down 2% (-115 yuan / ton) from the second quarter.

The average price of double-offset paper was 6010 yuan / ton, a drop of 13 over that.

8% (-965 yuan / ton), down by 1 from the second quarter.

2% (-71 yuan / ton).

On the cost side, the average price of coniferous pulp in the third quarter was 4,820 yuan / ton, a decrease of 31.

4% (-2207 yuan / ton), down 9 from the second quarter.

8% (-525 yuan / ton).

The average price of broad-leaf pulp in the third quarter was 5,136 yuan / ton, down 22 a year.

5% (-1492 yuan / ton), a decrease of 10 from the second quarter.

5% (-601 yuan / ton).

The decline in the cost side is faster than the decline in the price of paper, leading to a recovery trend in the ton of cultural paper. We estimate that the coated paper / double offset paper ton surplus will increase by 232/275 yuan / ton (assuming a pulp self-sufficiency rate of 40%).

For containerboard, the average market price in the third quarter was 3907 yuan / ton, a decrease of 23.2% (-1183 yuan / ton), down 7 from the second quarter.

2% (-302 yuan / ton).

The company has a high self-sufficiency rate of raw materials and weak cost elasticity. It is expected that the 深圳桑拿网 profitability in the third quarter will still be slightly pressured.

In the pulp business, according to the data in the interim report, the company’s dissolving pulp in the first half of the year achieved revenue18.

30,000 yuan, an annual increase of 26.

4%; gross profit margin 21.

7%, increase by 1 every year.

2pct.

Chemical Machinery Pulp achieved revenue 7.

7 ppm, a 10-year increase2.

9%; gross profit margin 23.

3%, a decline of 2 per year.

6 points.

Taken together, in the first half of the year, the company’s pulping business increased its performance in papermaking, and the cost advantage built by the forestry-pulp-paper integration strategy helped the company to ease the pressure on performance.

The expense ratio was basically flat, and the net interest rate improved substantially in the third quarter.

The company’s sales expense ratio for the first three quarters was 3.

7%, increase by 0 every year.

4pct.

Management expenses (including R & D expenses) rate is 4%, which is increased by 0 every year.

6 points.

Finance expense ratio 2.

7%, down by 0 every year.

8pct, the comprehensive cost rate is basically the same every year.

The company’s net profit in the first three quarters was 9.

1%, down 2 every year.

1pct.

Among them Q1 / Q2 / Q3 net interest rate is 7% / 9.

7% / 10.

7%, a decline of 7 per year.

6pct / down 2.

4pct / up 2.

6 points.

The company’s inventory was 27 as of the end of September.

800 million (27 at the end of June.

400 million), inventory turnover days 51.

7 days (51 at the end of June.

1 day).

New projects create growth poles, and pulp prices continue to benefit from low prices.

Since the company’s “Four Three, Three, Three” strategy was proposed in 2013, increasing production capacity expansion has become a key increase in the company’s performance.

New and new projects under construction in the first half of the year include: 1) 10-inch wood chip pulp and 40-inch semi-chemical pulp projects, and 20-inch natural high-yield biomass fiber projects (expected to start production in the fourth quarter of 2019).2) The 40 alternative recycled fiber pulp board production line in the 120 paper mill project in Laos (trial production in June 2019, and subsequent projects are expected to trial production in 2021).

3) The characteristic cultural paper 45 of the headquarters is inserted into the production capacity.

The new capacity is expected to help future performance growth.

In addition, we judge that the pulp mill’s output has not tightened / the pulp mill and port inventory continue to be high and the demand has not significantly improved. It is expected that the pulp price will fluctuate at a low level or decline slightly in the fourth quarter of 2019 to the first half of 2020Mainly, it is favorable for the company to continue to release cost pressure.

Investment suggestion: We expect the company to realize a net profit attributable to the parent company of 21 in 2019-2021.

2, 26, 30.

4 ‰, the ten-year average of 5.

3%, an increase of 22.

5%, an increase of 17.

3%; corresponding EPS is 0.

82, 1, 1.

17 yuan.

Maintain the company’s rating as “overweight”.

Risk reminders: the risk of rising raw material prices, macroeconomic risks, overseas investment policy risks