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A broad comparison of China’s Big Four tissue paper companies

This report aims to provide a comparison of China’s Big Four tissue paper

producers (C&S Paper, Hengan, Vinda and GHY Paper) from different

perspectives.

Product. C&S Paper is actively pushing into the high-end market while

growing high margin non-toilet paper sales. Hengan is a leader in both

tissue paper and sanitary products. Vinda is transitioning away from a

pure play towards an 11-brand portfolio spanning adult/feminine/baby

care. GHY Paper mainly produces tissue paper, kitchen towel and wet

paper towel occupying all price ranges.

Capacity. C&S Paper/Hengan/Vinda/GHY Paper had production capacity

of approximately 505,000/1.14mn/1.04mn/1.32mn tons in 2016.

Sales. C&S Paper devotes extra efforts to GT/KA/AFH/EC channel

development, stepping up its exposure in counties and towns through

direct sales and dealership. Hengan’s 300 plus sales offices work

seamlessly with more than 3,000 dealers nationwide. Vinda looks to e-

commerce as an important growth engine, which accounted for up to

18% of its 2016 sales revenue. GHY Paper counts on the strong back-up

of its parent APP for a well-established sales network extending to 160

countries and regions worldwide.

Headline performance. C&S Paper, Hengan, Vinda and GHY Paper

respectively posted

RMB3.809bn/RMB19.306bn/RMB10.79bn/RMB9.786bn in operating

revenue in 2016, with C&S Paper growing fastest in 1H17. Hengan

delivered the highest gross margin of 48.64% in the first half among the

Big Four, followed by C&S Paper (36.16%).

Earnings forecast. We estimate C&S Paper to have an operating revenue

of RMB4.689bn/5.723bn for 2017/2018, up 23.11%/22.05% YoY,

corresponding to a net profit of RMB353mn/465mn, up 35.8%/31.7%

YoY, EPS of RMB0.47/0.61, and 32x/25x PER. The company now has a

valuation of RMB11.3bn. Maintain Buy.

Risk factors: pulp price spikes; intense competition

Rating Buy

Issuing analyst:

Steven Liu, CFA, PhD (CE No.: AMO971)

[email protected] +852 3465 5652

Date: 5 Dec 2017

Share price performance

-22%

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18%

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中顺洁柔上证指数

C&S Paper (002511 CH)

mailto:[email protected]

Listed company in-depth

C&S Paper


Contents

1. Company profiles .................................................................................................................................................. 1

1.1 C&S Paper .................................................................................................................................................... 1

1.2 Hengan ......................................................................................................................................................... 1

1.3 Vinda ............................................................................................................................................................ 2

1.4 GHY Paper .................................................................................................................................................... 3

1.5 Leadership ................................................................................................................................................... 3

2. Product comparison .............................................................................................................................................. 4

2.1 C&S Paper: improved product mix ............................................................................................................. 4

2.2 Hengan: leading market shares in tissue paper and sanitary products .................................................... 5

2.3 Vinda: going diversified .............................................................................................................................. 7

2.4 GHY Paper: finished paper products a major revenue source ................................................................... 9

2.5 Product positioning ................................................................................................................................... 10

3. Capacity & Sales comparison .............................................................................................................................. 12

3.1 Production capacity .................................................................................................................................. 12

3.2 Capacity distribution ................................................................................................................................. 12

3.3 Sales channels ........................................................................................................................................... 13

4. Headline performance comparison .................................................................................................................... 15

4.1 Operating revenue .................................................................................................................................... 15

4.2 Gross/Net profit margin ............................................................................................................................ 16

4.3 Net profit attributable to the parent ........................................................................................................ 16

5. Operational efficiency comparison .................................................................................................................... 17

5.1 Turnover .................................................................................................................................................... 17

5.2 Expense ..................................................................................................................................................... 18

5.3 Incentive .................................................................................................................................................... 18

6. Leverage comparison .......................................................................................................................................... 19

6.1 Solvency ..................................................................................................................................................... 19

7. Earnings forecast ................................................................................................................................................. 20

1


C&S Paper


1. Company profiles

1.1 C&S Paper

C&S Paper Co., Ltd. (“C&S Paper”) is one of the Big Four tissue paper producers in China. The company floated on Shenzhen Stock Exchange in Nov. 2010, was the first of its kind to go public in China.

C&S Paper has production subsidiaries in Guangdong, Sichuan, Zhejiang, Hubei and Hebei, alongside its procurement and financing arm C&S Hong Kong Co Limited.

C&S Paper focuses on tissue paper, targeting different consumer groups with such household brands as C&S and SUN. Its deluxe “Natural Wood” series claimed to be made of 100% imported virgin wood pulp debuting in 1H17 is bound for the high-end segment.

The company has put in place stock incentive plans to align employee and company goals and drive business success.

Figure 1: C&S Paper’s history

Source: C&S Paper’s website; Research Dept, CSCI

1.2 Hengan

Hengan International Group Co., Ltd. (“Hengan”), a HK-listed company founded in 1985, mainly sells tissue paper, sanitary towels and paper diapers.

The company has embarked on three transformations, in an effort to improve lifecycle/target/supply chain management.

2


C&S Paper


Figure 2: Hengan’s history

Source: Hengan’s website; Research Dept, CSCI

1.3 Vinda

Vinda International Holdings Ltd (“Vinda”), a HK-listed company formed in 1985, was the first Chinese tissue paper company to have operations abroad by establishing a factory in Australia in 1999. The company has moved into baby diapers and sanitary towels by forming V-Care China Limited with three big shareholders in 2010, holding a stake of 41%. SCA, a strategic partner of Vinda, increased its shareholding in V-Care to 51.98% as of 1H17.

In 2014, following a HKD1.144bn purchase of SCA's operations in mainland China, Hong Kong and Macau, Vinda amplified its product lineup to include high-end tissue paper brands Tempo and Tork, Libresse (feminine care), Sealer, Drypers and Libero (baby care), and TENA and Dr.P (adult care).

Figure 2: Vinda’s history

Source: Vinda’s website; Research Dept, CSCI

3


C&S Paper


1.4 GHY Paper

Gold HongYe Paper Group (“GHY Paper”) was created in 1996 and operates as a subsidiary of APP, one of the world’s largest pulp and paper companies. GHY Paper enjoys stable raw material supply and access to strong sales channels throughout 160 countries and regions on the back of APP’s support.

Figure 3: GHY Paper’s history

Source: GHY Paper’s website; Research Dept, CSCI

1.5 Leadership

Table 1: CVs–Chairmen of C&S Paper, Hengan, GHY Paper and Vinda

姓名所属公司职务性别出生年份从业简历

邓颖忠中顺洁柔董事长男 1951

1979 年踏入造纸行业；1992 年至 1999 年担任中顺制造

公司董事长；1999 年至 2005 年担任中顺纸业有限公司董事

长、法定代表人，2005 年至 2008 年担任该公司有限董事；

2008 年至今担任中顺洁柔纸业股份有限公司董事长。

施文博恒安国际董事会主席，执行董事男 1950

1980 年至 1985 年从事成衣生意；1985 年创建恒安实业

有限公司，进军生活用纸行业；现任恒安国际集团有限公司董

事会主席兼执行董事。

李朝旺维达国际董事会主席，执行董事男 1958

1985 年出任“新会日用工业品厂”厂长；1999 年至 2000 年

担任维达国际控股有限公司执行董事；2000 年至今担任维达

国际董事会主席。

黄志源金红叶集团董事长男 1944

1976 年至 1991 年担任集伟化学纸业有限公司总经理；

1991 年至今，担任金光集团董事长兼总裁；2016 年至今兼任

金红叶纸业集团有限公司董事长兼法人代表。

Source: annual reports; Research Dept, CSCI

4


C&S Paper


2. Product comparison

2.1 C&S Paper: improved product mix

Table 2: C&S Paper’s major offerings

品牌系列特点图例

洁柔产品

Face 定位高端用户，以黑白色系为主打，推出针

对男性消费者的古龙水香产品，可湿水

Lotion 定位高端客户，包装风栺高贵、时尚、大

方，添加保湿成分，柔滑

C&S 定位中低端，颜色、款式多，如青春校园

系列

太阳产品

金太阳温馨居家设计

太阳之纸活泼可爱，颜色丰富

洁猫温馨居家设计

国际版年轻个性时尚

Source: Research Dept, CSCI

C&S Paper delivered a revenue growth of 28.7% in 2016, with tissue paper and other products jumping 28.39% and 68.18% YoY, respectively.

The company’s gross margin rose by around 6 pct in the last three years, largely down to the percentage of higher margin non-toilet tissue climbing to 53.54% in 2016 from 50.42% in 2014.

5


C&S Paper


Figure 4: C&S Paper business breakdown 2014-2016

Source: Wind; Research Dept, CSCI

Toilet/Non-toilet tissue had a gross margin of 30.90%/41.91% in 2016, accounting for 43.26%/53.54% of C&S Paper’s total revenue.

Figure 5: C&S Paper’s gross margin by product category 2014-1H17


2.2 Hengan: leading market shares in tissue paper and sanitary products

Hengan boasts to be China’s largest producer of tissue paper and sanitary products for women and children.

46.77% 45.03% 43.26%

50.42% 52.42% 53.54%

2.19% 1.67% 2.04%0.63% 0.88% 1.15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014 2015 2016

卷纸非卷纸类半成品其他业务

6


C&S Paper


Table 3: Hengan’s product line-up

类别品牌 LOGO

质感生活

健康护理

母婴呵护

时尚美丽

Source: Hengan’s website; Research Dept, CSCI

In 1H17, tissue paper/sanitary towels/paper diapers/other products generated a sales revenue of RMB4.57bn/3.44bn/1.001bn/552mn, up 0.04%/up 7.2%/down 6.2%/down 24.77% YoY, accounting for 47.79%/35.97%/10.47%/5.78% of Hengan’s major operating revenue. In terms of gross margin, tissue paper was down 2.4 pct YoY in the first half mainly due to rising pulp prices and fiercer competition, while sanitary towels slightly up 0.3 pct YoY at 72.1%, thanks to the “going high-end” strategy.

Figure 6: Hengan business breakdown 2014-1H17


45.56 44.17 47.03 47.79

31.17 31.42 34.08 35.97

12.99 12.45 11.15 10.47

6.44 5.18 3.85 6.77 7.74 5.78

0

10

20

30

40

50

60

70

80

90

100

2014 2015 2016 2017H1

纸巾产品卫生巾产品一次性纸尿裤产品零食产品其他产品

7


C&S Paper


Figure 7: Hengan’s gross margin by product category 2014-1H17


2.3 Vinda: going diversified

Vinda is diversifying towards an 11-brand portfolio spanning adult/feminine/baby care.

Table 4: Vinda’s sprawling brand portfolio targeting different market segments

品类品牌来源特点

卫生用纸

维达(Vinda)

自创针对一、二线及沿海发达城市的中端纸巾

得宝（Tempo)

爱生雅高端纸巾品牌

多康（Tork）

爱生雅商用生活用纸及配套产品

失禁护理

添宁（TENA）

爱生雅全球知名成人失禁用品品牌

包大人(Dr.P)

台湾全日美亚洲知名成人失禁用品牌

女性护理轻曲线(Libresse)

爱生雅瑞典及北欧领导品牌,全球位居第五位

30

35

40

45

50

55

60

65

70

75

80

2014 2015 2016 2017H1

卫生巾业务纸巾业务纸尿裤零食综合毛利率

8


C&S Paper


薇儿（Via）

自创品牌自创品牌，主打持久无湿舒适体验

婴儿护理

丽贝尔（Libero）

爱生雅瑞典高端婴儿护理用品

嘘嘘乐（Sealer）

爱生雅最早进入中国的外资婴儿纸尿裤品牌

爱贝多（Babyfit）

自创主打日夜分用，科学育婴理念

Drypers

爱生雅马来西亚领导品牌，被爱生雅收购

Source: Vinda’s website; Research Dept, CSCI

Vinda saw the sales percentage of toilet paper fall from 60.9% in 2012 to 50% in 2015, while higher gross margin non-toilet tissue rise from 10.5% in 2012 to 12% in 2015, with facial tissue/wet paper towel & others up from 20.6%/4.8% in 2012 at 30%/6% in 2015.

Figure 8: Vinda business breakdown 2012-2015


Following the integration of SCA’s Asian activities, the newly added personal care products raked in revenue of RMB91mn/284mn/1.819bn/1.072bn in 2014/2015/2016/1H17, accounting for 1.44%/3.49%/16.87%/19.58% of Vinda’s operating revenue for the same period.

60.9 58.4 54.6 50

10.5 11.310.7

12

3.2 2.92.3

2

16.2 19.223.3 26

4.4 3.7 3.5 44.8 4.5 5.6 6

0

10

20

30

40

50

60

70

80

90

100

2012 2013 2014 2015

卫生纸纸巾餐巾纸软抽面巾盒装面巾湿巾及其他

9


C&S Paper


Figure 9: Vinda has been actively beefing up its product portfolio


2.4 GHY Paper: finished paper products a major revenue source

GHY Paper mainly produces tissue paper, kitchen towel and wet paper towel occupying all price segments, with Breeze its main cash cow. The company offers base paper as well as finished paper products, with the latter responsible for 85% of its major operating revenue.

Table 5: GHY Paper’s range of products

品牌系列特点图例

唯洁雅

盒装面纸致力满足您对纸巾顶级品质的需求

厨房纸巾吸油吸水、超级强韧、遇湿不破

卫生纸云压工艺、柔韧升级、细腻加倍

纸手帕鸟笼设计精致高雅

抽取式面纸优化纸张表面、细腻光滑

清风超质感更柔、更韧、超质感

98.56 96.51 83.13 80.42

1.44 3.49 16.87 19.58

0

10

20

30

40

50

60

70

80

90

100

2014 2015 2016 2017H1

生活用纸产品个人护理产品

10


C&S Paper


厨房用纸 “点对点”蜂巢吸收、吸水吸油能力强大

马蹄莲吸水力强、纸质柔软厚实

绿茶茉香原生木浆、茉莉花香+茶香，草本天然

原木纯品 100%原生木浆、柔软厚实

真真

抽取式面纸活泼可爱、柔韧小巧

抽取式卫生纸实用性性价比、经济实惠

卷筒卫生纸压花+平纹设计、性价比高

无芯卷筒纸三层单压、经济实惠

平板型生活用纸单层生活用纸、经济实惠

纸手帕双层迷你纸手帕、柔韧小巧更贴切

Source: GHY Paper’s website; Research Dept, CSCI

2.5 Product positioning

When it comes to product positioning, the Big Four all set their sights on the mid-range and high-end.

Table 6: The Big Four’s product positioning

Source: company websites; Research Dept, CSCI

11


C&S Paper


A comparison between Vinda and Breeze shows that the former has managed to secure growth in both revenue and net profit by increasing the proportion of its high-end offerings, while the latter has been building up revenue in its relatively low margin products. C&S Paper is now pursuing a strategy similar to Vinda’s, as witnessed by its launch of the “Natural Wood” series.

Table 7: Product price comparison

纸企品牌产品产品特点推出时间类型定价（元）规格

中顺洁柔洁柔

Face 系列

湿水更好用，可作洗

脸巾 2015

迷你手帕纸 7.9 4 层*8 片*18 包

敞篷式包装设计，创

新易开口专利

抽取式纸面

巾 19.9 3 层*130 抽*6 包

更柔更润，一格就好 2015 卷纸 57.9 4 层*180g*23 卷

LOTION 超迷你手

帕纸

添加保湿因子，锁水

更柔滑 2015 迷你纸手帕 11.9 4 层*6 片*18 包

金红叶清风

本色木浆纸面向居家外用市场；

无漂白 2015 抽式面巾纸 11.9 2 层*150 抽*6 包

清风新韧时代系

列产品

加厚，加韧，吸水不

易破 2014 抽式面巾纸 19.9 3 层*150 抽*3 包

恒安心相印

茶语丝享高端系

列干用柔软、湿用强韧 2013 迷你纸手帕 7.9 4 层*8 片*10 包

纸心柔系列心柔 3 层，柔韧加倍 2015 卷纸 63.9 3 层 180g*27 卷

维达

维达

婴儿系列柔软 2012 抽式面巾纸 35.9 3 层*150 抽*6 包

绵柔系列针对儿童，海绵宝宝 2012 抽式面巾纸 21.9 2 层*200 抽*6 包

Feel 系列针对年轻群体，青春

活力 2012 迷你纸手帕 9.9 4 层*7 片*12 包

倍韧系列针对家庭主妇，追求

实用 2012 抽式面巾纸 7.9 2 层*200 抽*3 包

蓝色经典系列经典 2015 卷纸 76.9 3 层*200g*27 卷

Tempo Tempo 系列德国高端品牌，加厚

加韧，取材天然

2014 抽式面巾纸 14.9 4 层*90 抽*3 包

2014 迷你手帕纸 25 4 层*7 片*12 包

Source: Tmall; Research Dept, CSCI

12


C&S Paper


Figure 10: Vinda and C&S Paper both see a steady climb in their unit price per ton


3. Capacity & Sales comparison

3.1 Production capacity

C&S Paper currently has a production capacity of 505,000 tons, the lowest among the Big Four, which is hoped to scale up to 650,000 tons by 2018, eying a further 250,000 tons to be built in Hubei and Tangshan (Hebei).

Hengan boasted a capacity of 1.14mn tons by 2016, able to produce 102.2mn cases (or around 650,000 tons) of tissue paper annually.

Vinda’s production capacity stood at 1.04mn tons as of year-end 2016 compared to 950,000 tons by 2015.

GHY Paper’s production capacity was 1.32mn tons by 2016 and 1.27mn tons by 2015.

3.2 Capacity distribution

C&S Paper has production subsidiaries in Guangdong, Sichuan, Zhejiang, Hubei and Hebei, working seamlessly with more than 1,700 dealers across China.

Hengan has 40 plus production subsidiaries across 15 provinces/cities/municipalities in China, enabling the company to quickly respond to market needs.

Vinda has 14 production bases located in China, Taiwan, Malaysia and Australia, laying a solid groundwork for the company’s rising sales outside China.

GHY Paper has production bases in Tianjin, Shenyang, Chengdu, Wuhan, Fuzhou, Guangdong, Hainan and Qingdao.

1.16

1.09

1.061.05

1.15

1.111.12

1.19

1.161.18

0.95

1

1.05

1.1

1.15

1.2

1.25

2012 2013 2014 2015 2016 2017H1

金红叶出厂价维达国际出厂价中顺洁柔出厂价

13


C&S Paper


Figure 11: Hengan’s capacity distribution Figure 12: Vinda’s capacity distribution

Source: Hengan’s website; Research Dept, CSCI Source: Vinda’s website; Research Dept, CSCI

Figure 13: C&S Paper’s capacity distribution Figure 14: GHY Paper’s capacity distribution

Source: C&S Paper’s website; Research Dept, CSCI Source: GHY Paper’s website; Research Dept, CSCI

3.3 Sales channels

C&S Paper put a lot of efforts into GT/KA/AFH/EC channel development and management in 2016 to prop up its sales performance. It keeps on expanding its presence in counties through direct sales and towns through dealership. Meanwhile, the company has created a retail fortress through strategic partnerships with supermarket chains such as Walmart, Carrefour and PARKnSHOP, and looks set to boost its online sales to over 15% of its 2017 revenue.

Hengan has set up 300 plus sales offices nationwide, selling products through over 3,000 dealers and exporting to regions like Southeast Asia and Africa.

辽宁沈阳

北京

浙江龙游

四川德阳

湖北孝感

香港九龙

台湾台北广东江门

辽宁沈阳

海南

四川成都湖北武汉

福建福州

山东青岛

天津

广东

14


C&S Paper


Vinda looks to e-commerce as an important revenue driver, with online sales accounting for 18% of its 2016 sales

revenue, up 5 pct YoY.

GHY Paper has access to stable raw material supply and strong sales channels throughout 160 countries and regions on

the back of APP, whose total/net asset came in at RMB161.831bn/58.094bn as of year-end 2016.

Figure 15: Hengan’s sales network Figure 16: Contribution from Vinda’s sales channels 2016

Source: Wind; Research Dept, CSCI Source: Wind; Research Dept, CSCI

Figure 17: C&S Paper’s online shops Figure 18: APP’s major subsidiaries in China

Source: C&S Paper’s website; Research Dept, CSCI Source: APP’s website; Research Dept, CSCI

42%

13%

27%

18%

传统经销商 B2B商务客户现代大卖场及超市电商客户

15


C&S Paper


4. Headline performance comparison

4.1 Operating revenue

C&S Paper’s operating revenue stood at RMB3.809bn in 2016 (RMB3.766bn from tissue paper), the smallest among the Big Four, growing 0.80% in 2014 (the lowest among the Big Four), 28.74% in 2016 (closing in on Vinda), and 19.85% in 1H17 (outperforming Vinda). The company has maintained a CAGR of 15.04% since 2013, with tissue paper up 19.00% YoY in 1H17.

Hengan reported an operating revenue of RMB19.306bn in 2016 (RMB9.066bn from tissue paper). Hengan has been outdoing the other Big Four in terms of the size of revenue, but with much less impressive growth of -5.82% YoY in renminbi terms in 2016 and 1.53% in 1H17. The company has maintained a CAGR of 5.03% since 2013, with tissue paper inching up 0.04% in 1H17.

With regard to revenue, Vinda has been in second or third place among the Big Four, with the highest growth rate for the 2014-2016 period and the second highest in 1H17 at 13.32% after C&S Paper. The company posted an operating revenue of RMB10.79bn in 2016 (RMB8.966bn from tissue paper), growing at a CAGR of 26.36% since 2013, compared to a moderate 4.66% for tissue paper in 1H17.

GHY Paper had an operating revenue of RMB9.786bn in 2016 (RMB9.639bn from tissue paper), growing at a subdued 2.61%/5.31% YoY in 2016/1H17, outpaced by C&S Paper. The company has maintained a CAGR of 11.55% since 2013, with tissue paper growing 5.74% YoY in 2016.

Table 8: Comparison in revenue size and growth rate

营业收入规模（亿元人民币）营业收入同比增速（%）

2014 2015 2016 2017H1 2014 2015 2016 2017H1

恒安国际 188.10 205.00 193.06 99.92 12.88 8.98 -5.82 1.53

维达国际 63.02 81.29 107.90 54.89 17.84 28.99 32.73 13.32

中顺洁柔 25.22 29.59 38.09 21.23 0.80 17.34 28.74 19.85

金红叶 81.28 95.37 97.86 50.00 15.29 17.33 2.61 5.31


Table 9: Comparison in tissue paper sales revenue and growth rate

生活用纸营业收入规模（亿元人民币）生活用纸营业收入同比增速（%）

2014 2015 2016 2017H1 2014 2015 2016 2017H1

恒安国际 85.65 90.48 90.66 45.70 6.76 5.64 0.20 0.04

维达国际 62.08 78.39 89.66 44.03 17.21 26.27 14.38 4.66

中顺洁柔 25.06 29.33 37.65 20.86 1.01 17.00 28.39 18.96

金红叶 79.25 91.16 96.39 - 14.40 15.03 5.74 -


16


C&S Paper


4.2 Gross/Net profit margin

In terms of overall gross margin, Hengan benefited from its diversified product portfolio, seizing the first spot at 48.64% in 1H17, up 2.53 pct from 2014, followed by C&S Paper (36.16%), Vinda (30.53%) and GHY Paper (25.28%).

As to net profit margin, Hengan again is the clear winner, up 1.89 pct at 18.56% in 1H17 from 2014, while C&S Paper made the greatest stride, rising 4.69 pct to 7.37% in 1H17 from 2014, compared with a slide from 7.43% in 2014 to 5.07% in 1H17 for Vinda and a mere 2.27% in 1H17 for GHY Paper.

Figure 19: Overall gross margin comparison Figure 20: Hengan’s gross margin by business unit


Figure 21: Gross margin comparison, tissue paper Figure 22: Net profit margin comparison

Source: Wind; company announcements; Research Dept, CSCI Source: Wind; Research Dept, CSCI

4.3 Net profit attributable to the parent

In 2016, C&S Paper posted RMB260mn in net profit attributable to the parent, up a whopping 195.27% YoY, followed by a notable growth of 47.81% in 1H17.

Hengan posted RMB3.597bn in net profit attributable to the parent in 2016, up 5.98% YoY, further growing 13.39% YoY in 1H17.

20

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2014 2015 2016 2017H1

恒安国际维达国际中顺洁柔金红叶纸业集团

20

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80

2014 2015 2016 2017H1

卫生巾业务纸巾业务纸尿裤零食

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32

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36

38

40

2014 2015 2016 2017H1


0

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17


C&S Paper


Vinda reported a net profit attributable to the parent of RMB585mn in 2016, up a respectable 122.43% against a mere 1.09% increase in 1H17.

GHY Paper saw its net profit attributable to the parent surge 120.11% YoY to RMB361mn in 2016, up a further 29.55% YoY in 1H17. The company fell behind Hengan and Vinda in this respect during the 2014-2016 period.

Table 10: Comparison in net profit attributable to the parent and growth rate

归母净利润规模（亿元人民币）归母净利润同比增速（%）

2014 2015 2016 2017H1 2014 2015 2016 2017H1

恒安国际 30.89 33.94 35.97 18.54 5.57 9.87 5.98 13.39

维达国际 4.68 2.63 5.85 2.78 9.60 -43.80 122.43 1.09

中顺洁柔 0.68 0.88 2.60 1.56 -41.38 29.41 195.27 47.81

金红叶 1.51 1.64 3.61 1.11 38.35 8.13 120.11 29.55


5. Operational efficiency comparison

5.1 Turnover

Concerning inventory turnover rate, GHY Paper has been well ahead of the other Big Four, which can be credited to its low price strategy, with C&S Paper and Vinda overtaking Hengan in both 2016 and 1H17. C&S Paper’s first-half inventory turnover rate was 5.04, slightly up from 4.25 in 2016.

Regarding accounts receivable turnover rate, Hengan maintained an edge before 2016, GHY Paper lagged behind others in 1H17, Vinda made good progress during the 2014-2016 period but encountered a drop in 1H17, and C&S Paper led the Big Four with an annualized rate of 7.98 in 1H17.

Figure 23: Inventory turnover rate comparison Figure 24: Accounts receivable turnover rate comparison


2.0

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C&S Paper


5.2 Expense

Due to increased marketing spend, C&S Paper recorded relatively high selling expense ratio of 19.93% in 1H17, trailed by Hengan (18.59%), Vinda (17.22%) and GHY Paper (15.62%).

Hengan/C&S Paper/Vinda/GHY Paper had an administrative expense ratio of 6.07%/5.66%/5.45%/1.87% in 1H17.

Owing to relatively high debt/asset ratio, GHY Paper has been registering a financial expense ratio higher than that of the other Big Four. GHY Paper/Hengan/Vinda/C&S Paper revealed a financial expense ratio of 4.98%/2.35%/1.52%/1.14% in 1H17.

Hengan has always had the highest overall expense ratio among the Big Four. Hengan/C&S Paper/Vinda/GHY Paper recorded an overall expense ratio of 27.01%/26.73%/24.19%/22.47%in 1H17.

Figure 25: Selling expense ratio comparison Figure 26: Administrative expense ratio comparison


Figure 27: Financial expense ratio comparison Figure 28: Overall expense ratio comparison


5.3 Incentive

In Oct. 2015, C&S Paper launched a restricted stock incentive plan to grant 19mn restricted shares in three tranches (30%/30%/40% after 12/24/36 months of the first granting), accounting for 3.90% of the company’s share capital as of the date the plan was announced, on the precondition that operating revenue/net profit for 2016/2017/2018 should reach the target of RMB3.456bn/156mn, RMB4.037bn/238mn and RMB4.618bn/308mn, respectively.

14

15

16

17

18

19

20

21

2014 2015 2016 2017H1

恒安国际维达国际中顺洁柔金红叶

0

1

2

3

4

5

6

7

8

9

2014 2015 2016 2017H1


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2

3

4

5

6

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C&S Paper


In August, C&S Paper unveiled its first ESOP, covering nine of its core employees. As of Sep. 29, 2017, the ESOP had accumulated 14.77mn shares bought from the secondary market at RMB13.6503 apiece with a total value of RMB201mn, accounting for 1.95% of the company’s share capital.

By contrast, Hengan and Vinda haven’t offered any stock incentive plans so far.

Table 11: C&S Paper’s restricted stock incentive plan

激励目标营业收入

目标额

较 2014 年营业

收入比较

较上年营业收入

同比

净利润

目标额

较 2014 年净利润

比较

较上年净利润

同比

2016 年 ≥34.55 亿元 ≥37% 16.8% ≥1.56 亿元 ≥129% 77%

2017 年 ≥40.35 亿元 ≥60% 16.8% ≥2.37 亿元 ≥249% 52.4%

2018 年 ≥46.15 亿元 ≥83% 14.4% ≥3.07 亿元 ≥352% 29.5%

Source: company announcements; Research Dept, CSCI

Table 12: C&S Paper’s operating revenue/net profit performance 2016/1H17

激励情况较 2014 年营业收入同比（%）较 2014 年净利润同比（%）较上年营业收入同比（%）

较上年净利润同比

（%）

2016 年 51.06 285.80 28.74 195.27

2017 年 H1 - - 19.85 47.81

Source: company announcements; Research Dept, CSCI

6. Leverage comparison

6.1 Solvency

GHY Paper has long had a debt/asset ratio higher than that of the other Big Four. GHY Paper/Hengan/Vinda/C&S Paper registered a debt/asset ratio of 62.74%/59.25%/53.74%/38.93% in 1H17, with C&S Paper having the best improvement in liability composition in the context of rapidly growing revenue and intensive expansion.

C&S Paper has been maintaining a liquidity ratio much higher than that of the other Big Four, with Hengan’s close to GHY Paper’s and Vinda’s the lowest. In 1H17, C&S Paper led the Big Four with a liquidity/quick ratio of 2.23/1.54.

Hengan has the highest EBIT/interest expense among the Big Four, roughly five times that of GHY Paper, with C&S Paper quickly picking up while Vinda and GHY Paper in decline. All the Big Four have an EBIT/interest expense of greater than 1.5, an indication that they have the basic ability to repay debts.

20


C&S Paper


Figure 29: Debt/Asset ratio comparison Figure 30: Liquidity ratio comparison


Figure 31: Quick ratio comparison Figure 32: EBIT/interest expense comparison


7. Earnings forecast

We estimate C&S Paper to have an operating revenue of RMB4.689bn/5.723bn in 2017/2018, up 23.11%/22.05% YoY, corresponding to a net profit of RMB353mn/465mn, up 35.8%/31.7% YoY, EPS of RMB0.47/0.61, and 32x/25x PER. The company currently has a valuation of RMB11.3bn. Maintain Buy.

From Oct. 2012 to Oct. 2017, C&S Paper, Hengan and Vinda saw their PE (ttm) move within the range of 19.1-104.1 (a mean of 41.14), 16.1-32.5 (a mean of 24.7) and 13.9-58.7 (a mean of 28.4), respectively.

Figure 33: C&S Paper’s historic valuation


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PE 均值 -1标准差 +1标准差

21


C&S Paper


Figure 34: Hengan’s historic valuation Figure 35: Vinda’s historic valuation


Table 13: Valuation comparison

营业收入同比增长净利润同比增长 PE

2015 2016 2017H1 2015 2016 2017H1 2015 2016 2017H1 2015 2016 2017H1 2017 2018

中顺洁柔 29.59 38.09 21.23 17.34% 28.74% 19.85% 0.88 2.60 1.56 30.66% 195.27% 47.81% 32 25

恒安国际 205 193.06 99.92 8.98% -5.82% 1.53% 33.94 35.97 18.54 9.87% 5.98% 13.39% 19 18

维达国际 81.29 107.9 54.89 28.99% 32.73% 13.32% 2.63 5.85 2.78 -43.80% 122.43% 1.09% 24 22


Table 14: Financial benchmarking

公司恒安国际金红叶维达国际中顺洁柔

时间 2015 2016 2017H1 2015 2016 2017H1 2015 2016 2017H1 2015 2016 2017H1

公司业务描述生活用纸主打品牌“心相印” APP 旗下，主打品牌为“清风”，纸浆自供爱生雅控股，主打品牌“维达” 主打品牌为“洁柔”

生产能力产能（万吨） 102 114 - 127 132 - 95 104 - 50 50.5 -

销量（万吨） - - - 74.97 78.00 - 65.7 - - 24.93 33.66 -

业务规模

营业收入（亿元） 205 193.06 99.92 95.37 97.86 50 81.29 107.9 54.89 29.59 38.09 21.23

同比（%） 8.98 -5.82 1.53 17.33 2.61 5.31 28.99 32.73 13.32 17.34 28.74 19.85

其中：生活用纸（亿元） 90.48 90.66 45.7 91.16 96.39 - 78.39 89.66 44.03 29.33 37.65 20.86

同比（%） 5.64 0.20 0.04 15.03 5.74 - 26.27 14.38 4.66 17.00 28.39 18.96

市场占比（%） 19.90 20.10 - 17.00 17.00 - 14.30 14.20 - 6.80 7.80 -

盈利能力

综合毛利率（%） 47.61 48.78 48.64 26.74 28.37 25.28 30.51 31.66 30.53 32.03 35.92 36.16

其中：生活用纸（%） 35.6 37.9 35.3 25.22 28.05 25.06 30.51 31.66 30.53 32.35 36.28 36.73

销售费用率（%） 18.21 19.27 18.59 18.94 17.86 15.62 16.13 17.2 17.22 17.47 18.93 19.93

管理费用率（%） 7.03 7.68 6.07 1.99 2.05 1.87 5.95 6.04 5.45 6.7 5.39 5.66

财务费用率（%） 1.91 1.79 2.35 3.52 3.95 4.98 1.11 1.37 1.52 3.54 1.55 1.14

归母净利润（亿元） 33.94 35.97 18.54 1.64 3.61 1.11 2.63 5.85 2.78 0.88 2.6 1.56

同比（%） 9.87 5.98 13.39 8.13 120.11 29.55 -43.8 122.43 1.09 29.41 195.45 47.81

净利润率（%） 16.77 18.67 18.56 2.22 3.97 2.27 3.24 5.42 5.07 2.98 6.84 7.37

运营能力应收账款周转率 9.59 7.54 3.64 7.6 6.31 2.84 8.58 8.71 3.88 7.64 7.8 3.99

库存周转率 3.36 2.77 1.62 5.46 5.7 2.84 3.06 3.97 2.09 2.96 4.25 2.52

偿债能力资产负债率 54.4 56.77 59.25 64.71 63.32 62.74 60.43 56.62 53.74 46.44 40.25 38.93

流动比率 1.22 1.45 1.31 1.28 1.3 1.37 1.1 1.03 1.07 1.81 2.15 2.23


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2012-10-19 2013-10-19 2014-10-19 2015-10-19 2016-10-19

PE PE均值 -1标准差 +1标准差

22


C&S Paper


Table 15: C&S Paper’s financial figures

中顺洁柔：国内首家 A 股上市的生活用纸企业

2014 年 2015 年 2016 年 2017H1

总收入（亿元） 25.22 29.59 38.09 21.23

同比（%） 0.80 17.34 28.74 19.85

归母净利润（亿元） 0.68 0.88 2.60 1.56

同比（%） -41.78 30.66 195.27 47.81

综合毛利率（%） 30.04 32.03 35.92 36.16

非卷纸 12.71 15.51 20.40 -

非卷纸收入占比（%） 50.40 52.42 53.54 -

非卷纸毛利率（%） 36.76 37.92 41.91 -

卷纸 11.79 13.32 16.48 -

卷纸收入占比（%） 46.75 45.02 43.26 -

卷纸毛利率（%） 24.40 26.70 30.90 -

半成品业务 0.55 0.49 0.78 -

半成品收入占比（%） 2.18 1.66 2.05 -

半成品毛利率（%） 3.79 3.78 2.73 -

其他业务 0.16 0.26 0.44 -

其他业务收入占比（%） 0.63 0.88 1.16 -

其他业务毛利率（%） 1.94 7.46 4.64 -

中国大陆收入 24.17 28.69 37.11 20.72

占比（%） 95.84 96.96 97.43 97.55

国外收入 0.89 0.90 0.98 0.52

占比（%） 3.53 3.04 2.57 2.45

其他业务（地区） 0.16 - - -

占比（%） 0.63 - - -

销售费用率（%） 15.67 17.47 18.93 19.93

管理费用率（%） 6.66 6.70 5.39 5.66

财务费用率（%） 2.88 3.54 1.55 1.14

净利润率（%） 2.68 2.98 6.84 7.37

净资产收益率（%）（摊薄） 2.87 3.62 9.66 5.53

成立时间：前身为成立于 1999 年的中顺纸业有限公司，2010 年 11 月 25 日深交所上市交易。

董事长：邓颖忠（1951）。截止 2017H1，第一股东为广东中顺纸业集团有限公司，持股比例 29.16%。

产能：随着公司云浮中顺项目和四川中顺项目的逐步投产，公司产能达到 50 万吨/年，公司计划在湖北扩建 20 万吨高档生活用纸项目，在唐山

扩建 7.5 万吨高档生活用纸项目，云浮二期的 12 万吨高档生活用纸项目也将逐步实施。

公司营销网络：覆盖全国绝大部分地（县）级城市，采取直销到县、分销到镇的渠道下沉策略，细分市场、扩大经销商网络布局；同时公司与沃

尔玛、华润万家、大润发、家乐福和百佳等大型连锁卖场建立良好的合作关系，并逐步将重点卖场转为公司直营。另外，公司加大在天猫、淘宝、

京东、一号店、苏宁等电商平台的投入，并搭建配置相应的物流系统

生产基地：公司分别在广东中山、江门、云浮、四川成都、浙江嘉兴、湖北孝感、河北唐山建有七大生产基地,销售网络辐射华东、华南、华西、

华北、华中和港澳六大区域，产品远销东南亚、中东、澳洲、非洲等海外市场。


23


C&S Paper


Table 16: Hengan’s financial figures

恒安国际：稳健成长的家庭生活用品供应商

2014 年 2015 年 2016 年 2017H1

总收入（亿元） 188.10 205.00 193.06 99.92

同比（%） 12.88 8.98 -5.82 1.53

净利润（亿元） 30.89 33.94 35.97 18.54

同比（%） 5.57 9.87 5.98 13.39

综合毛利率（%） 46.11 47.61 48.78 48.64

纸巾产品 85.65 90.48 90.66 45.70

纸巾收入占比（%） 45.53 44.14 46.96 45.74

卫生巾产品 58.60 64.37 65.69 34.40

卫生巾收入占比（%） 31.15 31.40 34.03 34.43

一次性纸尿裤 24.41 25.51 21.50 10.01

一次性纸尿裤收入占比（%） 12.98 12.44 11.14 10.02

销售费用率（%） 20.30 18.21 19.27 18.59

管理费用率（%） 6.55 7.03 7.68 6.07

财务费用率（%） 2.06 1.91 1.79 2.35

净利润率（%） 16.67 16.77 18.67 18.56

净资产收益率（%）（摊薄） 22.20 23.25 24.42 12.14

产能（万吨） 102.00 102.00 114.00 114.00

成立时间：创立于 1985 年，1998 年 12 月 8 日在香港联合交易所成功上市

集团主席：施文博（1950），截至 2017H1 持股比例 19.43%。

拓产能：根据 2016 年报，预计 2018 年提升到约 143 万吨

渠道：在全国设立 300 多个销售办事处，通过 3000 多个分销商，产品覆盖全国传统和现代市场近百万个销售商店。

生产基地：15 个省、市、自治区，投资设立 40 余家生产公司

注：以上数据根据 HKD/CNY 历史汇率计算


Table 17: Vinda’s financial figures

维达国际：国内卫生用纸行业龙头

2014 年 2015 年 2016 年 2017H1

总收入（亿元） 63.02 81.29 107.90 54.89

同比（%） 17.84 28.99 32.73 13.32

净利润（亿元） 4.68 2.63 5.85 2.78

同比（%） 9.60 -43.80 122.43 1.09

综合毛利率（%） 30.16 30.51 31.66 30.53

生活用纸 62.08 78.39 89.66 44.03

生活用纸收入占比（%） 98.51 96.43 83.10 80.21

个人护理 0.91 2.84 18.19 10.72

个人护理收入占比（%） 1.44 3.49 16.86 19.53

中国大陆收入 57.28 72.04 81.74 40.29

占比（%） 90.89 88.62 75.76 73.40

中国香港 5.40 8.25 9.60 4.52

占比（%） 8.57 10.15 8.90 8.23

海外 0.31 0.94 16.51 9.93

占比（%） 0.49 1.16 15.30 18.09

传统经销商（%） - 46.00 42.00 -

B2B 商务客户（%） - 12.00 13.00 -

大卖场及超市（%） - 29.00 27.00 -

电商客户（%） - 13.00 18.00 -

销售费用率（%） 14.88 16.13 17.20 17.22

管理费用率（%） 5.91 5.95 6.04 5.45

财务费用率（%） 1.04 1.11 1.37 1.52

净利润率（%） 7.43 3.24 5.42 5.07

净资产收益率（%）（摊薄） 11.68 6.36 9.64 3.96

产能（万吨） 89.00 95.00 104.00 104.00

成立时间：创建于 1985 年，2007 年 7 月在港交所上市

董事会主席：李朝旺，截至 2017H1 持股比例为 22.72%

收购事件：2013 年 9 月，Tempo 纸巾的生产商瑞典爱生雅集团宣布斥资 86.47 亿港元全面收购维达国际，截止 2016 年 12 月 31 日，持股维达 54.57%

产能：截止 2016 年 12 月 31 日，产能达 104 万吨。2017 年年底设计产能将达到 110 万吨。

主要销售区域：中国大陆、香港、台湾、新加坡、马来西亚、韩国、澳洲

生产基地：中国大陆（广东、山东、北京、湖北、辽宁、四川、浙江等省份共 10 个），中国台湾高雄 1 个，马来西亚 2 个，澳洲 1 个。

注：以上数据根据 HKD/CNY 历史汇率计算。


24


C&S Paper


Table 18: GHY Paper’s financial figures

金红叶纸业：亚洲知名的生活用纸产销商

2014 年 2015 年 2016 年 2017H1

总收入（亿元） 81.28 95.37 97.86 50.00

同比（%） 15.29 17.33 2.61 5.31

归母净利润（亿元） 1.51 1.64 3.61 1.11

同比（%） 38.35 8.13 120.11 29.55

综合毛利率（%） 27.24 26.74 28.37 25.28

销售费用率（%） 19.73 18.94 17.86 15.62

管理费用率（%） 2.21 1.99 2.05 1.87

财务费用率（%） 2.86 3.52 3.95 4.98

净利润率（%） 2.17 2.22 3.97 2.27

净资产收益率（%）（平均） 2.20 2.18 4.45 1.28

成立时间：1996 年 3 月成立，1998 年 8 月开始投产

公司规模：占地面积 1.14 平方公里，集团现有员工 13000 余人，总投资 16.907 亿美元

生产基地：天津、沈阳、成都、武汉、福州、广东、海南、青岛等地有加工基地

主要产品：卷筒卫生纸、抽取式卫生纸、珍宝卷纸、盒装面纸、抽取式面巾纸、袖珍面纸、纸手帕、餐巾纸、厨房用纸、大型卷筒卫生纸、擦手

纸和湿纸巾

产能：目前，年产生活用纸原纸 80 万吨，成品加工年产 60 万吨。


25


C&S Paper


Research

Institutional Sales & Trading

LIU Taisheng, Steven

TMT

(852) 3465 5652

[email protected]

SO Lai Shan, Jennifer

Consumer

(852) 3465 5781

[email protected]

CHAN Ka Yeung, Duncan

Commodity

(852) 3465 5654

[email protected]

TIAN Yang

Automotive

(852) 3465 5775

[email protected]

SUN Lingxiao, Roger

Industrials

(852) 3465 5785

[email protected]

YAO Xue, Snowy

Utilities & Coal

[email protected]

+852 3465 5675

SHEN Xiangfei, Thomas

(852) 3465 8689

[email protected]

XU Qiwen

(852) 3465 8690

[email protected]

XIANG Xinrong, Ron

(852) 3465 5633

[email protected]

HO Wen Hao, Jack

(852) 3465 5685

[email protected]

WANG Zhuo, Gary

(852) 3465 8655

[email protected]

LEE Ying Ju, Rose

(852) 3465 5707

[email protected]

LI Jiageng, Mike

(852) 3465 5636

[email protected]

XIA Tian

(852) 3465 5670

[email protected]

XU Xiaowei, Vincent

(852) 3465 5795

[email protected]





mailto:34655685/[email protected]





26


C&S Paper


Company Rating Definition The Benchmark: Hong Kong Hang Seng Index; Time Horizon: 12 months

Buy 12-month absolute total return: >=10%

Hold 12-month absolute total return: >-10% but <10%

Sell 12-month absolute total return: <=-10%

Disclosure of Interests As of the date of this report, 1. The research analysts primarily responsible for the preparation of all or part of this report hereby certify that:

(i) the views expressed in this research report accurately reflect the personal views of each such analyst about the subject securities and issuers; and

(ii) no part of the analyst’s compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed in this research report.

2. The research analysts primarily responsible for the preparation of all or part of this report, or his/her associate(s), do not have any interest (including any direct or indirect ownership of securities, arrangement for financial accommodation or serving as an officer) in any company mentioned in this report,

3. This report has been produced in its entirety by China Securities (International) Brokerage Company Limited (“China Securities (International)”) (CE Number: BAU373, regulated by the Securities and Futures Commission in Hong Kong)

4. China Securities (International) and each of its group companies that carry on a business in Hong Kong in investment banking, proprietary trading or agency broking in relation to securities have no financial interest, in aggregate, equal to or more than 1% of the market capitalization in the stocks reviewed in this report.

5. China Securities (International) and each of its group companies that carry on a business in Hong Kong in investment banking, proprietary trading or agency broking in relation to securities may receive compensation from or mandates for investment banking services in the past 12 months from listed corporations whose stocks are being reviewed by China Securities (International) in this report.

6. China Securities (International) and each of its group companies that carry on a business in Hong Kong in investment banking, proprietary trading or agency broking in relation to securities do not have any individual employed by or associated with them serving as an officer of a listed corporation whose stocks are being reviewed by China Securities (International) in this report.

7. China Securities (International) and each of its group companies that carry on a business in Hong Kong in investment banking, proprietary trading or agency broking in relation to securities may act as the market markers in the stocks reviewed by China Securities (International) in this report.

Disclaimer This report is for information purposes only and should not be construed as an offer to sell or to solicitation of an offer to buy or sell any securities in any jurisdiction. The securities referred to in this research report may not be eligible for sale in some jurisdictions. This information contained in this report has been compiled by China Securities (International) from sources that it believes to be reliable and the opinions, analysis, forecasts, projections and expectations contained in this report are based on such information and are expressions of belief only and no representation, warranty or guarantee is made or given by China Securities (International) or any person for its accuracy or completeness. All opinions and estimates expressed in this report are (unless otherwise indicated) entirely those of China Securities (International) as of the date of this report only and are subject to change without notice. Such opinions and estimates may be different from or contrary to the opinions presented by the other business departments, units or affiliates of China Securities (International), as different assumptions and standards, different views and analytical methods may be adopted in the preparation of such other materials, and China Securities (International) is under no obligation to bring such other materials to the attention of any recipient of this report. Neither China Securities (International) nor its holding companies and affiliates accept any liability whatsoever for any direct or consequential loss arising from any use of material contained in this report or otherwise arising in connection therewith. Any investment referred to herein may involve significant risk, may be illiquid and may not be suitable for all investors. The value of or income from any investment referred to herein may fluctuate and be affected by changes in exchange rates. Past performance is not indicative of future results. This report does not take into account the investment objectives, financial situation or particular needs of any particular person. Investors are expected to make their own investment decision without relying on this publication. Before entering into any transactions in any securities referred to in this research report investor should consider their own individual investment objectives and financial situation and seek professional financial, tax and legal advice, as necessary. This report is strictly confidential to the recipient. It is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose. The distribution of this report in other jurisdictions may be restricted by law, and persons into whose possession this report comes should inform themselves about, and observe, any such restrictions. By accepting this report you agree to be bound by the foregoing instructions.

China Securities (International) Research

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Tel: (852) 34655600 Fax: (852)21809495

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