Paper industry value analysis

Chapter I industry overview

Papermaking is one of the four great inventions of China, and the annual production and sales volume of China's paper industry rank first in the world, accounting for about a quarter of the global total. From the Western Han Dynasty to today, it still brings great convenience to the global civilization transmission and life and work. Papermaking is an important invention of the ancient Han working people. There are two forms: mechanical and manual. The mechanism is carried out continuously on the paper machine, the pulp suitable for the quality of the paper is diluted with water to a certain concentration, and the network part of the paper machine is initially dehydrated, forming a wet paper page, and then dehydrated by pressing, and then dried into paper.

As can be seen from the above chart, the proportion of paper industry revenue in GDP is declining, which is a declining industry, the number of enterprises is decreasing, mergers and acquisitions are increasing and some enterprises are withdrawing from the paper industry.

The paper industry can be divided into pulp, machine paper and board, processed paper and paper products in general. Due to different classifications, there are occasional crossovers in the subdivisions. Different from handmade paper; Paper and board made on various types of paper machines. It can be subdivided into printing paper and paperboard, writing, drawing and reproducing paper and paperboard, packaging paper and paperboard, living, sanitary and decorative paper and paperboard, technical paper and paperboard, processing paper base paper.

Chapter two: Business model and income model

The raw material of papermaking is mainly pulp. According to the different raw materials, papermaking in the middle reaches can be divided into "wood pulp system" paper species with wood pulp as raw material and "waste paper system" paper species with waste pulp as raw material. "Waste paper" paper types mainly include box board paper, corrugated paper, the downstream of the industrial chain is mainly paper packaging products; "Wood pulp" paper types include cultural paper, household paper and white cardboard.

The paper industry is an important midstream industry, the upstream carries agriculture, forestry and pulp and paper, and the downstream connects packaging and printing and related consumer industries. The upstream raw materials are mainly pulp and waste paper, and the consumer industry in the downstream industry has a large demand.

Industry driving force: As a traditional manufacturing industry with wide downstream demand, the paper industry mainly analyzes industry dynamics based on supply and demand, price, output, consumption, capacity, inventory, etc.

Demand: The paper industry involves a wide range of downstream industries, including packaging, printing, consumer industries, etc. The prosperity of the downstream industry directly affects the demand of the paper industry, and then affects the supply and demand relationship of the industry, resulting in changes in price and output.

Supply: To determine whether the new production capacity of the industry is actually decreasing, the core comes from the national environmental protection policy and the administrative regulation of capacity reduction, and from the automatic contraction of industry profits.

Inventory: Under the current pattern of stable economic expectations, the volatility of the paper industry is gradually converging, and after the increasingly heavy capital cost pressure is superimposed, the volatility of the inventory has also begun to be gradually compressed and narrowed.

Cyclical: The paper industry is an atypical cyclical industry, and the industry prosperity is closely related to national policies and last year's sales demand, and the periodicity is not very obvious.

Chapter III Industry valuation and global leading enterprises

3.1 Industry comprehensive financial analysis

3.2 Development and price driving mechanism

The paper industry is characterized by a high dependence on the international market for upstream pulp: due to the relative lack of domestic forest resources, more than 50% of pulp is imported. Raw wood pulp is affected by the global economic boom and supply and demand, the price is global pricing, domestic enterprises do not have a strong influence on the price, belong to the price taker. The raw material cost accounts for a high proportion of the total product cost, about 70%. Occupying the upstream can increase cost control and raw material control, which shows that the paper industry is also a cyclical industry.

The paper industry is a highly polluting industry with high environmental protection requirements, policy barriers to entry, and high capital and technical requirements for capacity expansion → Scale is the most important competitive advantage. Generally, the first and second quarters are off-season, and the third and fourth quarters are better, and the performance is low before and high after.

The upstream cycle of the industry is long, and the capacity supply is easy to predict: the maturity of the forest takes more than 5 years; It takes 1-2 years to put in large equipment and supporting capacity for pulp production. In addition to individual segments, the overall growth rate of downstream demand has slowed down: China's economy has entered the "new normal" and the overall growth rate of downstream demand has slowed down. However, it is also necessary to look at the classification, the demand for household paper and corrugated cardboard continued to grow steadily, while newsprint and printed writing paper fell sharply.

Paper industry is a typical cyclical industry, supply and demand determine paper prices and profits. Its downstream is mainly the consumer goods industry, the cyclical demand is weak, but due to the lag of production capacity supply 1-1.5 years, the mismatch between production capacity and demand leads to cyclical fluctuations in paper prices and paper enterprise profits. At the same time, the inventory cycle also has an impact on paper prices and the short and medium term profits of paper companies, and the inventory cycle center is about half a year. In addition, due to the high import dependence of pulp, paper prices are driven by raw material import costs.

Fundamentals: 1) Waste paper system: affected by the decline in global demand, exports of some downstream industries are under pressure, but the import quota of foreign waste is shrinking, the supply of raw materials is tightening, the price difference between domestic waste and foreign waste is expanding, and the leading company has the thickening pad of income. 2) Wood pulp system: pulp price is low, demand is expected to be stable, which is conducive to the profit repair of paper enterprises. It is expected that the prosperity of each subdivision paper species of wood pulp system is better than that of waste paper system as a whole in the future, and the prosperity of wood pulp system is sorted as follows: coated paper > household paper > white cardboard > double adhesive paper. 3) The finished products of household paper are no longer used as intermediate raw materials in other links, and are directly oriented to consumers. Daily necessities refer to all kinds of sanitary products used to take care of individuals at home and travel, including sanitary paper (toilet paper, napkins, facial tissues, kitchen paper, etc.), diapers and sanitary napkins. Toilet paper has the characteristics of strong water absorption, less bacteria, soft paper, uniform thickness, more complex in the process, and a certain barrier to entry in technology. And mainly for C-side customers, the industry added value and profit margins are relatively high.

3.3 Competition Analysis

Waste paper system: The demand of some downstream industries is under pressure, and the leader enjoys a profit advantage. Wrapping paper has been the biggest impact of the epidemic, and the epidemic has accelerated the industry reshuffle. In recent years, the price increase of corrugated cardboard is mainly driven by the supply contraction and the price increase of raw materials. From the perspective of ton paper profit, the gross profit margin of box board corrugated paper fell to a lower level. Box board corrugated paper demand growth is less than the capacity growth, the supply is still excess. The raw material side strictly controls the import trend of foreign waste, and the import quota is concentrated in the leading. The imbalance between domestic waste supply and demand has intensified, the price difference between domestic waste and foreign waste has widened, and the dragon head has the thickening pad of income.

Wood pulp system: low pulp price shock, conducive to the profit repair of paper enterprises. Wood pulp: the low price of pulp oscillates, which is conducive to the improvement of the gross profit margin of paper enterprises. Coated paper: The demand remains stable, and the gross profit margin is high. Double adhesive paper: The price remains high, the profit continues to repair. White cardboard: industry profitability repair, prosperity recovery.

Household paper cost transfer ability is strong, profitability is better and more stable. From the perspective of horizontal comparison of the climate of each fine molecule industry in the paper industry, we think that the wood pulp system is better than the waste paper system as a whole, and the order of the wood pulp system is: coated paper > household paper > white cardboard > double adhesive paper; However, the leading waste paper companies will still have higher profitability due to the enjoyment of waste paper quota dividends.

The overall capacity of the paper industry is excess, and the paper classification reflects the characteristics of structural excess. From the supply side, the growth of industry supply is limited, and the concentration is gradually rising. In recent years, limited by the lack of waste paper import quota, domestic waste paper recycling network and raw material control ability such as "forest pulp and paper integration", small-scale production capacity actively withdrew. Under the gradual increase of environmental protection policies, backward production capacity in the industry has been forced to withdraw. In addition, the requirements of environmental protection, technology and capital have led to a generally high barrier to entry for the industry. Under the influence of many factors, the industry supply growth is limited, and the industry concentration continues to rise. From the demand side, there are significant differences in the downstream demand growth of each paper species, and the overcapacity of the paper industry is reflected in the characteristics of structural excess. The excess capacity pressure of packaging paper represented by box board paper and corrugated paper is relatively not significant; Due to the rigidity of downstream demand, the overall supply and demand pattern of household paper is relatively stable; The demand for cultural paper has downward pressure, and excess capacity is more significant.

Based on the analysis of the characteristics of the industry and the development trend of the industry, the evaluation of the operating fundamentals of the main body of the paper industry should be carried out from three dimensions: business structure and production capacity, raw material control ability and profitability. Industry risks are mainly: over-expected production capacity and industry policy changes.

3.4 Ranking of Chinese enterprises

International Paper: International Paper (NYSE: IP) is a global paper and packaging company. The company's businesses include uncoated paper, industrial and consumer packaging, and forest products. Headquartered in Memphis, Tennessee, USA, the company has approximately 59,500 employees in 24 countries and customers around the world. Net sales in 2010 were $25 billion. International Paper operates in North America, Latin America, Europe including Russia, Asia and North Africa. Founded in 1898, International Paper is currently the world's largest paper and forest products company, and is one of only four listed companies in the United States with a century-old history, with its global headquarters in Memphis, Tennessee, USA. For nine consecutive years, Fortune Magazine has named North America's most admired company in the forest products and paper industries. It has been named one of the world's most ethical companies by Moral Village magazine for five consecutive years. It was ranked 424 on the 2012 Fortune Global 500 list.

Kimberly-clark is a global leader in health care. Founded in 1872, the company has production facilities in 35 countries and employs nearly 42,000 people. Personal health care products, household paper and commercial consumer products are Kimberly-Clark's three core businesses, with annual sales of more than $18 billion, and products are sold in more than 175 countries and regions. Founded in 1872, Kimberly-Clark Corporation is a global industry leader in health care. Personal health care products, household paper and commercial consumer products are the three core businesses of Kimberly-Clark Corporation. Kimberly-clark has production facilities in 35 countries worldwide, products are sold in more than 175 countries and regions, and nearly 42,000 employees. In more than 140 years of entrepreneurial history, Kimberly-Clark has many inventions and the world's first, Kotex as the first to the public menstrual education brand, so that disposable menstrual care products are widely accepted. Kimberly-clark has always been known for perfect quality, excellent service and fair treatment, and its famous international brand products have become an integral part of consumers' daily lives. About a quarter of the world's people use Kimberly-Clark products every day and believe that these products will make their health and life more convenient. Kimberly-clark's famous brands such as Kleenex, Huggies, Kotex, Scott Scott, Pull-Ups, Depend, Andrex and Poise occupy the first or second place in the market share in more than 80 countries.

Chapter IV Future industry outlook

According to the pricing and regulatory mechanism of the paper industry, while striving to improve the energy saving and emission reduction technology in the production process, the paper industry can effectively interact with the upstream forestry, forest and paper integration, and the paper industry can truly achieve low-carbon production.

The core of the so-called integration of forest and paper is to break the traditional model of incoordination between forestry and paper industry in the past, make full use of the market to organically combine the four major production factors of land, forest, pulp and paper, speed up the construction of wood pulp raw forest base of paper enterprises, and form a virtuous circle of "forest with paper, paper with forest, paper with forest, and collaborative development".

Industry insiders believe that "forest-paper integration" will become the future development direction of the domestic paper industry. On the one hand, the integration of forest and paper is conducive to the adjustment of the structure of papermaking raw materials. Traditional straw pulp papermaking consumes a lot of energy and has heavy pollution. Replacing straw pulp papermaking with wood pulp and changing the traditional raw material structure has reached the point of urgency. At present, most of the wood pulp required by China's paper industry relies on imports, which are often subject to others and are very passive. The most effective solution is to produce homemade wood pulp, so the upstream forestry development, the construction of raw material forest is the inevitable choice of paper industry. On the other hand, forest-paper integration can help the paper industry effectively improve carbon productivity. As we all know, improving carbon productivity is the core of developing low-carbon economy, and improving carbon productivity can be achieved by improving industry efficiency output, improving carbon sink and reducing carbon sources. In the production mode of "forest and paper integration", the upstream raw material forest in addition to providing wood pulp raw materials for downstream papermaking, can also absorb carbon dioxide, greatly increase the carbon sink, and can provide biofuels and reduce carbon sources. Some experts even said that the paper industry "forest paper integration" can almost achieve zero emissions of carbon dioxide.