Chiyou Co., Ltd. (603429) Company Review: High-standard assessment encourages the launch of cigarette label volume + thin card position advantages

Chiyou Co., Ltd. (603429) Company Review: High-standard assessment encourages the launch of cigarette label volume + thin card position advantages
Equity incentives constrain the interests of the management team, with a large percentage of core shareholders participating.The company issued an equity incentive plan that proposed to expand the number of shares to 6.85 million shares, accounting for the company’s total share capital2.58%; of which, 5.48 million shares were granted for the first time, accounting for 2 of the total share capital.06%; budget 1.37 million shares, accounting for 0 of the total share capital.52%, the budget portion accounts for 20 of the maximum rights granted this time.00%.The incentive plan involves 26 people, including company directors, senior managers, and core management and key personnel.Among them, the company’s cigarette label business leader, company president Guo Shuguang was awarded 168 shares.70,000 shares, accounting for 24 of the total number of shares in this expansion.62% of the total share capital is 0.63%, a large proportion of the company’s core management personnel were awarded incentives for joint stock companies, the company’s future development momentum is strong.The initial grant price for the highest stock is 17.79 yuan, the sale restriction period is 12, 24, 36 months, the proportion of lifting the sale restriction is 30%, 30%, 40% respectively. The introduction of high-level assessment standards demonstrates the company’s confidence.The company’s 2019-2021 performance appraisal (net profit attributable to the mother who does not pay the share expenditure expenses) has targets of RMB 240 million and RMB 600 million, an annual increase of 73.3%, 100.0%, 50.0%, the company issued high-performance evaluation standards, showing the company’s business development confidence, we expect the company’s performance will maintain rapid growth year by year.Part of the total amortization expenses granted for the first time by this incentive is approximately 6906.500,000 yuan, if awarded at the end of October 19, the amortization cost of each period of 19-22 is 671.47, 3683.47, 1784.18, 767.39 thousand yuan. The Chinese version of heating does not burn more than 100 billion spaces, and the company’s sheet technology field has a carding advantage.HNB cartridges are clearly classified as tobacco products, and are managed by the Tobacco Monopoly Bureau in accordance with the law. The production and sales are exclusively monopolized by China Tobacco.China Tobacco Corporation is actively deploying new tobacco products. Hubei, Sichuan, and Yunnan China Tobacco alternate heating type new tobacco products have been released. Currently, Guangdong, Sichuan, Hubei, and Yunnan have begun to sell heated non-combustion products overseas, and many provinces are actively storing.China Tobacco’s positive actions reflect a clear domestic policy attitude.Jiyou focuses on heating non-combustion products, and continues to promote cooperation with China Tobacco. The company is leading the HNB layout. In 17 years, it established a joint engineering center with Anhui Tobacco.The conditions of formula screening and small batch setting out of the homogenized tobacco crushed tobacco group are both performed.It has joined hands with Jiangsu Tobacco and Chongqing Tobacco to jointly develop and promote the achievement of industrialization and landing is worth looking forward to.The company’s wafer production qualification is being smoothly promoted, and the Chinese version of HNB is continuously advancing. The company’s wafer technology has a card position advantage.HNB is a blue ocean market with a scale of more than 100 billion. The annual profit of the segmented market is nearly 10 billion. Domestic policies actively promote the development of 武汉夜生活网 new tobacco products. The future is bright and broad. The company’s 19-year cigarette standard has entered a heavy volume period, which has contributed to great performance flexibility.In 19H1, the new production capacity of the tobacco label in Taihu Base was officially put into operation, and the technical reform of Shaanxi Dafeng was carried out smoothly. After the cigarette label was in place at the end of 18 years, the certification work of new customers for about half a year had achieved results, and the tobacco label revenue in the first half of the year1.45 billion (VS 18 initially 1.5.7 billion), benefiting from increased production capacity in the second half of the year, new customer orders, and the peak bidding season for cigarette labels. The cigarette labels are expected to enter a rapid volume period, with sales 北京夜网 of 220,000 boxes in 18 years, and we expect to reach 800,000 boxes in 19 years.The completion of the project is expected to reach 2.45 million boxes after the project is completed in 2020. 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 brand to integrate its tobacco tipping paper production capacity, eliminating capacity replacement. 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 profit margin of cigarette tipping paper business has steadily increased. The performance evaluation target of the incentive plan exceeded expectations, and we are highly optimistic about the company’s two-wheel drive for its smoke standard and heating and non-combustion business.Cigarette labels enter a period of rapid volume reduction. The dual technology advantage of heating and non-combustion card works closely with China Tobacco. The traditional cigarette paper loading reduces costs and improves efficiency steadily.We maintain the company’s profit forecast for 19/20/21 attributable to the parent’s net profit at 2.33/4.97/7.USD 6.6 billion, an annual increase of 102% / 113% / 54%. The current corresponding PE is expected to be 40.46X / 18.97X / 12.30. Maintain “Buy” rating. Risk Warning: The development of cigarette label business is less than expected, the new tobacco policy is less than expected, etc.