In 2021-11-03, Shi Fanke of Zhejiang Merchants Securities Co., Ltd. studied Shanghai Elu and released the research report "Shanghai Ailu Review report: Q3 Operation is sound, normal temperature Cheese Packaging is expected to contribute to increment". The current share price is 15.63 yuan.

Shanghai Ailu (301062)
Main points of investment
Q3 has a sound operation, and the high level of raw materials is a slight drag on profit margins.
Q3 revenue is + 44.31% year-on-year (21H1 revenue is + 57.04%). The slight slowdown in income growth compared with the first half of the year is mainly due to the low impact of the 20H1 epidemic and the high base of 20Q3. Overall, the 21Q3 growth performance is still outstanding; Q3 gross profit margin is 30.84% (21H1 is 33.74%), year-on-year-3.58pct, the main period of high raw material prices, of which 60% of base paper comes from imports, and high sea freight also drives up procurement costs. In terms of business segments, orders for industrial base paper during the business period are robust, and profit margins are slightly compressed by raw materials; in the plastic packaging business, the big customer Miao Ke Landuo has steady growth, and the listing of normal temperature cheese is expected to contribute to a new incremental drive. Looking forward to Q4, considering the expected high volatility of raw material costs, profit margins may be flat; Q4 consumption season, sales are expected to increase steadily, looking forward to Q4 operating performance.
Smooth development of new customers, orderly expansion of production capacity, and sufficient driving force for growth in the medium term.
In terms of industrial paper bag business, major customers such as Oriental Yuhong and Shenyang Chemical have grown steadily, and the concentration in the lower reaches has increased steadily, and the company is expected to continue to share the growth dividend of key customers. In addition, industrial paper bag production capacity is expected to increase by nearly 80% by the end of next year, with sufficient growth momentum in the medium term. In terms of composite plastic packaging business, during the period, the company successfully cooperated with Miaoke Lando to develop room temperature cheese bar packaging, which is the first domestic enterprise in the industry to master room temperature packaging technology, and is expected to become a new driver for growth. In addition, the company has cut into a number of high-quality customer supply systems, such as Miao Ke Landuo, with a rich customer matrix and sufficient order reserves. Considering doubling the production capacity of cheese sticks by the end of next year, the company continues to be optimistic about the future growth of the company.
Profitability fell slightly and cash flow performed well
Q3 gross profit margin is 30.84% (- 3.58pct), which is mainly due to the high cost of purchasing raw materials. During the period, the expense rate was 16.25% (- 0.41pct), of which the sales expense rate was 4.43% (- 0.24pct), the management and R & D expense rate was 10.53% (+ 0.61pct), the financial expense rate was 1.28% (- 0.78pct), and the mother net interest rate was 13.38% (- 2.16pct). The final accounts receivable was 197 million yuan, a decrease of 30 million yuan compared with the beginning of the period, and the inventory was 302 million yuan, an increase of 110 million yuan over the beginning of the period, mainly due to an increase in the stock of raw materials. The net operating cash flow during the period was 39 million yuan, an increase of 38 million yuan over the same period last year.
Profit forecast and valuation
The downstream prosperity of the company is high, and it has entered a period of high-speed expansion of production capacity, with sufficient driving force for future growth. We expect to achieve income of 11.08,15.35 and 1.942 billion yuan from 2021 to 2023, an increase of 43.04%, 38.49% and 26.52% over the same period last year; and net profit of 1.61,2.24 and 278 million yuan, an increase of 44.74%, 39.21% and 24.28% over the same period last year, corresponding to PE of 36.10X, 25.93X and 20.87X respectively, maintaining the buying rating.
Risk hint
The fluctuation of raw material price, the fluctuation of downstream economy, and the lower-than-expected production capacity.

The stock has been rated by four agencies in the last 90 days, including three buy ratings and one overweight rating; the average institutional target price in the past 90 days is 21.0; according to the Securities Star valuation analysis tool, the Shanghai Elu (301062) good company has a rating of 3 stars, a good price rating of 1 star and a comprehensive valuation rating of 2 stars.