Chiyou Co., Ltd. (603429): Re-cooperate with China Tobacco System to Promote the Development of New Tobacco Field Maintain “Buy” Rating
The company’s flakes and China Tobacco System cooperate to upgrade, and the new tobacco field is next.The holding subsidiary Jiyou Guangyu and Chongqing China Tobacco Industry Co., Ltd. signed the Agreement on Establishing a New Type of Tobacco Homogenized Sheet R & D Cooperation Agreement. The subsidiary will conduct testing and research and development of new type of tobacco homogenized sheet materials, and provide tobacco raw materials and necessaryIn cooperation with China Tobacco, we will jointly promote the development of related industries such as new tobacco products and supporting materials for cigarettes. The company’s heating non-combustion sheet technology is extremely scarce, and cooperates with the China Tobacco System to promote the development of the Chinese version of HNB.The company has a leading position in the field of heating and non-combustion. In October 17th, it signed a cooperation agreement with Anhui Tobacco Smoke to establish a joint engineering center to promote the development of related industries such as new tobacco products and supporting materials for cigarettes.In November 18, a joint venture was established with Kunming Xuguang, which is mainly engaged in the development and design of new tobacco; the conditions of formula screening and small batch setting out of homogenized tobacco flakes have been carried out.The official announcement of joining hands with Jiangsu Tobacco is an important step for the company to cooperate with the China Tobacco System to promote the development of heating and non-combustion R & D and the industrialization of achievements. It is announced that the announcement will work with China Tobacco again, and the industry advantages and future prospects are worth looking forward to! Tobacco label business has entered a heavy-duty period in 19 years, and it is determined to increase the production capacity.The scale of the cigarette label market is 10 times that of the company’s traditional business tobacco tipping paper, and the market concentration is low.With the huge base of smokers and the steady recovery of the cigarette industry, according to our calculations, the current tobacco tipping paper market size is about 3.5 billion, and the cigarette label market size is about 40 billion, but the concentration has decreased.The company’s entry into the tobacco label industry will bring increased revenue. At the same time, the tobacco label and the company’s traditional tobacco tipping paper business can share customer resources and raw materials, which is conducive to digesting the company’s self-produced aluminum.The tipping paper business is expected to reduce customer search costs for suppliers, achieve common development, and achieve the effect of “1 + 1> 2”.The cigarette label business has entered the heavy volume period in 19 years to contribute to the increase in performance. Since June 2017, the company has changed the fundraising projects to build cigarette label production capacity and started to enter the cigarette label industry.Dafeng Technology was acquired in February 2018 to integrate its customers.At present, the bidding products of Anhui Tobacco, Yunnan Tobacco, and Shaanxi Tobacco have been awarded. The number of customers has continued to increase. It is planned to increase the production capacity of 1.95 million boxes of tobacco labels. It is expected to start production by the end of 2020, when the company’s total tobacco label capacity will reach2.45 million boxes. The Chinese version has broad prospects for heating and non-combustion, and the company’s new tobacco layout is leading.The development of new types of tobacco is in full swing in the world. At present, the global market for heated non-combustible products has reached 5 billion US dollars (up 138%). It is expected to reach 15 billion US dollars in 2021, which will account for 45% of the total volume of new tobacco products.Domestic policies actively promote the development of new tobacco products. Yunnan, Sichuan, Guangdong, and Hubei China Tobacco currently sells non-burning tobacco products overseas. Many provincial tobacco companies actively research and develop and store non-burning technology.The company’s leading R & D and layout of heating non-combustion sheet technology in China lays a foundation for becoming a core service provider of China Tobacco System in the future! The traditional tobacco tipping paper business has stable customers, serving 9 of the 18 China Tobacco companies, and continues to develop new customers. In 18, it acquired Kirin Fu to integrate its tobacco tipping paper production capacity, eliminating maximum production capacity.The company’s industrial chain is expanding. 85% of anodized aluminum in raw materials is self-produced, and the ink self-provisioning ratio is 98%. Compared to outsourcing, it saves 48% of costs. The gross 成都桑拿网 profit margin of cigarette tipping paper business has steadily increased. The company’s 19-year tobacco label has entered a period of rapid volume reduction, heating and non-combustion cooperate with China Tobacco, and the traditional cigarette loading paper reduces costs and improves efficiency steadily.Maintain the company’s profit forecast for 19/20/21 to net profit of the parent is 2.33/4.97/7.66 trillion US dollars, an annual increase of 102% / 113% / 54%, currently continuing (25.3 yuan) corresponding to PE 26 respectively.9X / 12.6X / 8.2x, maintain “Buy” rating. Risk warning: New business expansion is less than expected, new tobacco policy is less than expected, etc.