SUN PAPER(SZ:002078) Southwest Securities·2024-11-05 10:33Investment Rating - The report maintains a "Buy" rating for the company with a target price of 16.20 CNY over the next six months [1]. Core Insights - The company achieved a revenue of 30.98 billion CNY in the first three quarters of 2024, representing a year-on-year increase of 6.1%. The net profit attributable to shareholders was 2.46 billion CNY, up 15.1% year-on-year, while the net profit after deducting non-recurring items reached 2.6 billion CNY, a 24.3% increase year-on-year [1]. - The revenue growth is attributed to the continuous increase in sales following capacity expansion, particularly with the Nanning base's 300,000-ton household paper project entering trial production in Q3 [1]. - The overall gross margin for the first three quarters of 2024 was 16.4%, an increase of 0.9 percentage points year-on-year, while the Q3 gross margin was 14%, down 2.8 percentage points year-on-year, primarily due to high wood pulp prices and increased raw material costs [1]. - The company is expanding its production capacity, with total construction projects amounting to 25.2 billion CNY by the end of Q3 2024, a 339.1% increase compared to the end of 2023 [1]. Summary by Sections Financial Performance - In Q3 2024, the company reported a revenue of 10.45 billion CNY, a 6% increase year-on-year, and a net profit of 700 million CNY, down 20.8% year-on-year. The net profit after deducting non-recurring items was 770 million CNY, a decrease of 10.7% year-on-year [1]. - The gross margin for Q3 was impacted by high wood pulp prices, with needle pulp averaging 765 USD per ton, up 91.7 CNY year-on-year, and broadleaf pulp at 590 USD per ton, up 226.7 CNY year-on-year [1]. Cost Management - The total expense ratio for the first three quarters was 6.4%, down 1.1 percentage points year-on-year, indicating effective cost control measures [1]. - The company managed to reduce costs through optimized production and procurement arrangements, which is expected to enhance profitability in the dissolving pulp segment [1]. Capacity Expansion - The company is actively expanding its production capacity, with significant projects underway in Shandong and Guangxi, including a 37,000-ton specialty paper project and a 500,000-ton unbleached chemical pulp production line [1]. - The Nanning project is expected to contribute to the production of high-end packaging paper and specialty paper, with trial production anticipated to commence in 2025 [1]. Earnings Forecast - The company forecasts EPS of 1.14 CNY, 1.35 CNY, and 1.48 CNY for 2024, 2025, and 2026, respectively, with corresponding PE ratios of 12x, 10x, and 9x [1].