C&S(SZ:002511) Guotai Junan Securities·2024-09-09 04:06Investment Rating - The investment rating for the company is "Buy" [2] Core Views - The company is actively promoting product structure optimization and significantly improving gross margins despite facing pressure from a weak consumption environment and intensified industry competition [3][9] - The company has adjusted its 2024-2026 EPS forecast to 0.26, 0.30, and 0.35 CNY, down from the previous estimates of 0.32, 0.36, and 0.41 CNY, respectively, and has lowered the target price to 8.32 CNY from 10.16 CNY while maintaining the "Buy" rating [9][12] Summary by Sections Financial Performance - In H1 2024, the company achieved revenue of 4.021 billion CNY, a decrease of 14.2%, and a net profit attributable to shareholders of 88 million CNY, an increase of 3.7%. The net profit excluding non-recurring items was 69 million CNY, down 6.5% [9] - For Q2 2024, the company reported revenue of 2.176 billion CNY, down 17.1%, and a net profit of -8 million CNY, down 59.1% [9] Market Dynamics - The life paper industry is experiencing high product homogeneity, leading to increased competition and revenue decline for the company. The domestic revenue was 3.906 billion CNY, down 14.9%, while overseas revenue was 11 million CNY, up 20.4% [9] - The company is expanding its non-traditional sales channels, including e-commerce and community group buying, to capture more market share [9] Product and Margin Improvement - The company is focusing on high-end, high-margin products, which has led to a significant increase in gross margin to 32.83%, up 4.4 percentage points in H1 2024 [9] - The sales expense ratio increased to 21.53%, up 1.53 percentage points, while the net profit margin improved to 2.16%, up 0.4 percentage points [9] Valuation - The company is compared with peers, and a target price of 8.32 CNY is set based on a 32x PE ratio for 2024, reflecting its position as a leading player in the domestic life paper market [12]