Chiyou (603429): Join hands with Jiangsu Tobacco to advance the process of new tobacco

Chiyou (603429): Join hands with Jiangsu Tobacco to advance the process of new tobacco
Key investment events: Jiyou Shares issued a company announcement, and Anhui Jiyou Guangyu Technology Co., Ltd., a subsidiary of the company, signed a Memorandum on R & D Cooperation on New-type Tobacco Homogeneous Sheets with Nantong Tobacco Filter Co., Ltd.Nantong Smoke Filter Co., Ltd. is a wholly-owned subsidiary of Jiangsu Tobacco Industry Co., Ltd., and cooperates with Jiangsu Tobacco in the research and development of heating and non-combustion products.Jiyou Co., Ltd. and Nantong Tobacco Filters will implement the research and development of homogenized tobacco flakes, complete the performance testing and evaluation of the homogenized tobacco flakes, and coordinate the advancement of the industrialization of homogenized tobacco flakes and the application of industrialization results.This cooperation is valid for two years.  Deploy new tobacco core technologies to create new growth points in the future.Judging from the development trajectory of new-type tobacco abroad, tobacco flakes are the core technology substitute for heating non-combustible products, and play a decisive role in the taste of the new-type tobacco.Therefore, abroad, the research and development of thin sheet technology is the core layout point for tobacco companies to promote new tobacco products.For example, international tobacco giant Philip Morris International has invested up to $ 45 billion in the research and development technology of its new tobacco flagship product IQOS.The issuance of Youyou shares with Jiangsu Tobacco for research and development of homogenization and reorganization indicates that the company has begun to enter the new tobacco core technology field.  From the medium and long-term perspective, the growth of the new tobacco industry can be recognized with higher expectations.Globally: The number of e-cigarette users in 2011 was less than 7 million, and by 2018, the number of users exceeded 40 million. Euromonitor expects that the number of users will reach 55 million in 2021, accounting for nearly 5% of the total number of smokers.  US market: The United States is the most mature market for e-cigarettes worldwide, 2017 46.3 billion US dollars, accounting for 38 of the global scale.6%.There are about 9 million e-cigarette users in the United States, accounting for 16 of the total number of smokers.  4%.Japanese market: Japan is the main battlefield for heating non-combustible products. The sales volume of leading products, IQOS cartridges, accounts for 15% of the tobacco market volume.2%, heating non-combustion products accounted for 24.7%, the number of IQOS equipment holders accounted for the total number of 杭州夜网 smokers exceeded the maximum.Long-term growth: Take Philip Morris International’s long-term plan for IQOS as an example. In 2025, the number of IQOS users worldwide (excluding the United States) is 40 million, and this product alone will account for 4% of the total number of smokers in the world.The volume of smoke explosions was 250 billion pieces, accounting for about 40% of the company’s total emissions.Therefore, we believe that from a global perspective, the extension and replacement of traditional tobacco by new-type tobacco is accelerating. If the domestic new-type tobacco industry can achieve a market share of 10% in the future, it means that the industry scale will reach approximately 150 billion US dollars.  Cigarette labels have begun to take shape and look forward to future volume: in 2018, the company achieved a cigarette label sales income of 1.5.7 billion yuan, accounting for 34% of operating income.29%, has become another important source of revenue for the company following the tobacco tipping paper business.At present, the company’s new tobacco label production line has been formally put into operation, and the company and the acquisition of Dafeng Technology have also fully integrated, and have won the bidding of Anhui China Tobacco, Yunnan China Tobacco, and Shaanxi China Tobacco.Basic conditions for the big smoke label business.If calculated at the price of 750 yuan of cigarettes per large box, the sales volume of Chiyou’s cigarettes in 2018 is only 210,000 boxes, and there is still a lot of room for growth in benchmarking the production target of 1.95 million boxes of non-publicly raised funds.  Investment suggestion: Considering that the company’s cigarette label business is expected to gradually increase in 2019-2021, we predict that the company will realize net profit attributable to mothers in 19-21.07, 3.11, 3.73 ppm, a 79-year increase of 79.2%, 50.2%, 20%.Corresponds to EPS0.84, 1.25, 1.51 yuan.Maintain “Buy” rating.  Risk Warning: Tobacco industry policy risks, macroeconomic fluctuation risks, business expansion is not up to expectations