Comparison of the financial reports of the three major household paper giants: Is the inflection point of performance in 2023 coming?
Guide: At present, the price of wood pulp has entered a downward cycle, and the profit decline and performance decline brought about by the previous high cost are expected to be improved.
Zhongshun Jierou will achieve an operating income of 8.57 billion yuan in 2022, a year-on-year decrease of 6.34%; the net profit attributable to shareholders of listed companies is about 350 million yuan, a year-on-year decrease of 39.77%.
Vinda International will realize operating income of HK$19.418 billion in 2022, a year-on-year increase of 3.97%; net profit attributable to the parent company of HK$706 million, a year-on-year decrease of 56.91%.
Regarding the reasons for the decline in performance, Vinda International said that in addition to the impact of the epidemic in 2022, the continuous rise in raw material costs will have a negative impact on the company’s performance.
Hengan International will achieve revenue of 22.616 billion yuan in 2022, a year-on-year increase of 8.8%; the profit attributable to the company’s equity holders will be 1.925 billion yuan, a year-on-year decrease of 41.2%.
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From the perspective of revenue ratio, the paper towel business has always been the core business of Hengan International. In 2022, this business of Hengan International will indeed perform well. In 2022, the sales revenue of Hengan International’s paper towel business will increase by about 24.4% to 12.248 billion yuan, accounting for about 54.16% of the group’s overall revenue; it was 9.842 billion yuan in the same period last year, accounting for 47.34%.
Judging from the 2022 annual reports disclosed by the three paper companies, the decline in performance is mainly due to the sharp rise in raw material costs.
SunSirs monitoring data show that since 2022, the spot prices of softwood pulp and hardwood pulp, raw materials for wood pulp, have fluctuated upwards. The average market price of softwood pulp in Shandong once rose to 7750 yuan/ton, and hardwood pulp once rose to 6700 yuan/ton Ton.
Under the pressure of sharply rising raw material prices, the performance of major paper companies has also declined, and the industry still faces considerable challenges.
01. The rise in price is hard to offset the rise in raw materials
Raw materials used in the production process of tissue paper include pulp, chemical additives and packaging materials. Among them, pulp accounts for 50%-70% of the production cost, and the pulp manufacturing industry is the main and most important upstream industry of the household paper industry. As an international bulk raw material, the price of pulp is significantly affected by the world economic cycle, and the fluctuation of pulp price affects the gross profit level of household paper products.
Since November 2020, pulp prices have continued to rise. At the end of 2021, the price of pulp hovered at 5,500-6,000 yuan/ton, and by the end of 2022, it had soared to 7,400-7,800 yuan/ton.
In order to cope with the price increase of raw material costs, as early as December 2020, household paper companies across the country began to raise prices one after another. As of December 31, 2020, in the second half of 2020, the cumulative increase of finished paper has reached 800-1,000 yuan/ton, and the ex-factory price has risen from the lowest point of 5,500-5,700 yuan/ton to nearly 7,000 yuan/ton. , Xinxiangyin ex-factory price has reached 12,500 yuan / ton.
At the beginning of April 2021, companies such as Zhongshun Cleanroom and Vinda International continued to raise prices.
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Zhongshun Jierou stated in the price increase letter at that time that raw material prices continued to rise, and the company’s production costs and operating costs continued to increase. Vinda International (Beijing) also stated that due to the continuous rise in raw material prices, production costs have increased sharply, and it plans to adjust prices for some Vinda brand products from April 1.
Afterwards, in the first quarter of 2022, Zhongshun Jierou began to raise prices again, and advanced in stages. As of the third quarter of 2022, Zhongshun Jierou raised the prices of most of its products.
However, the continuous price increase of paper companies did not lead to a substantial increase in the company’s performance. On the contrary, the company’s performance declined due to rising costs.
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From 2020 to 2022, the revenue of Zhongshun Jierou will be 7.824 billion yuan, 9.15 billion yuan, and 8.57 billion yuan, respectively, with net profits of 906 million yuan, 581 million yuan, and 349 million yuan, and gross profit margins of 41.32% and 3.592 billion yuan respectively. %, 31.96%, and net interest rates were 11.58%, 6.35%, and 4.07%, respectively.
Vinda International’s revenue from 2020 to 2022 will be 13.897 billion yuan, 15.269 billion yuan, and 17.345 billion yuan, with net profits of 1.578 billion yuan, 1.34 billion yuan, and 631 million yuan. 28.24%, and the net interest rates were 11.35%, 8.77%, and 3.64%, respectively.
From 2020 to 2022, Hengan International’s revenue will be 22.374 billion yuan, 20.79 billion yuan, and 22.616 billion yuan respectively, and the tissue business will account for 46.41%, 47.34%, and 54.16% respectively; the net profit will be 4.608 billion yuan and 3.29 billion yuan respectively , 1.949 billion yuan; the gross profit margins were 42.26%, 37.38%, and 34% respectively, and the net profit margins were 20.6%, 15.83%, and 8.62%.
In the past three years, although the three major household paper companies have continued to raise prices, it is still difficult to offset the rising costs, and the company’s performance and profitability have continued to decline.
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02. The inflection point of performance may come soon
On April 19, Zhongshun Jierou released its first quarterly report for 2023. The announcement shows that in the first quarter of 2023, the company’s operating income was 2.061 billion yuan, a year-on-year increase of 9.35%; the net profit attributable to shareholders of listed companies was 89.44 million yuan, a year-on-year decrease of 32.93%.
From the perspective of the first quarter of 2023, the company’s performance has not reversed.
However, judging from the price trend of pulp, there are signs of optimism. According to the continuous data of the main force of pulp, the main force of pulp continued to rise from 4252 yuan/ton on February 3, 2020 to as high as 7652 yuan/ton on March 1, 2022. After that, it adjusted slightly, but remained at around 6700 yuan/ton . On December 12, 2022, the main force of pulp continued to rise to a high of 7452 yuan/ton, and then continued to decline. As of April 23, 2023, the main force of pulp continued to be 5208 yuan/ton, which has dropped by 30.11% from the previous high point .
If the price of pulp is maintained at this level in 2023, it will be almost the same as in the first half of 2019.
In the first half of 2019, the gross profit rate of Zhongshun Jierou was 36.69%, and the net profit rate was 8.66%; the gross profit rate of Vinda International was 27.38%, and the net profit rate was 4.35%; the gross profit rate of Hengan International was 37.04%, and the net profit rate was 17.67%. From this point of view, if the pulp price is maintained at around 5,208 yuan/ton in 2023, the net interest rate of the three major household paper companies is expected to increase significantly, and their performance will also usher in a reversal.
CITIC Securities predicts that in the downward cycle of pulp prices from 2019 to 2020, the external quotations of softwood pulp/hardwood pulp will be as low as US$570/450/ton. From 2019 to 2020 and the first half of 2021, Vinda International’s net profit margin will be 7.1%, 11.4%, 10.6%, the net interest rate of Zhongshun Jierou is 9.1%, 11.6%, 9.6% respectively, and the operating profit rate of Hengan International tissue business is 7.3%, 10.0%, 8.9%.
In the fourth quarter of 2022, the net profit margins of Vinda International and Zhongshun Jierou will be 0.4% and 3.1% respectively. In the first half of 2022, the operating profit margin of Hengan International’s paper towel business will be -2.6%. Enterprises will focus on restoring profitability, sales promotion efforts are expected to be controlled within a certain range, and terminal prices are relatively stable.monthly sweet box
Taking into account the competitive landscape (new production capacity of tissue paper in 2020/2021 is 1.89/2.33 million tons) and the leading price strategy, CITIC Securities predicts that the net profit rate of the leading tissue paper in this round of pulp price down cycle is expected to recover to 8%-10% %.
At present, pulp prices have entered a downward cycle. Under this background, household paper companies are expected to usher in a performance reversal.
Post time: May-15-2023
