Dongfeng Shares: A Cigarette Pack Printing Integrator Building New Profit Growth in E-Cigarettes, Fu

Dongfeng Shares: A Cigarette Pack Printing Integrator Building New Profit Growth in E-Cigarettes, Fu

Although $Dongfeng Shares (SH601515)$  stock price remains stable, fluctuating between 11-12 yuan, it may be in the early stages of a medium-term upward trend.

Dongfeng's main business is printing cigarette labels.
    The cigarette label industry is experiencing certain organic growth (about 10% to 15%), driven by the company's increased market share among existing mid-to-high-end cigarette clients, the promotion of the cigarette label bidding system, and new client breakthroughs based on the company's advantages amid the background of the separation of the tertiary industry. Future external acquisitions are expected to accelerate: the acquisition of Yunnan Luliang Fupai Color Printing has opened the door for the company to leverage its financial and platform advantages for industry-wide integration. Dongfeng has laid out a complete cigarette label industry chain, with integrated advantages leading its peers, more controllable costs, and guaranteed quality. The company's client structure is primarily composed of mid-to-high-end cigarette brands, with over 80% of its revenue coming from three or more categories of cigarettes, leading in profitability with a gross margin consistently exceeding 10 percentage points above its peers;

New business in e-cigarettes:
    With a large base of smokers in China, the development prospects for e-cigarettes are promising. In 2013, the U.S. e-cigarette market was approximately $1 billion, while China has 350 million smokers, about 6 to 7 times that of the U.S., making the domestic e-cigarette market worth looking forward to. Considering that the average price of e-cigarettes ranges from 50 to 200 yuan/set (1 e-cigarette puff is roughly equivalent to 1-2 packs of traditional cigarettes), the consumer group mainly consists of mid-to-high-end cigarette consumers. Currently, the market size for mid-to-high-end cigarettes in China is about 700 billion yuan (conservatively estimated). Assuming an e-cigarette penetration rate of 3% to 5%, the market space could be around 21 billion to 35 billion yuan. If future technological advancements and economies of scale lead to a decrease in e-cigarette prices, the consumer base could further expand to include all smokers, thus enlarging the market space.
    In recent years, Chinese smokers have gradually accepted e-cigarette consumption. Since 2013, the search and transaction indices for e-cigarettes on e-commerce platforms like Taobao have shown a gradual upward trend, with the search index for "e-cigarettes" increasing by 28.4% in the last seven days, and a year-on-year increase of 265.9%.


New business in functional films:
    The FET-based film business is a phased achievement of the company's strategy to extend along the cigarette label industry chain. Once fully operational, it will ensure the quality of raw materials for cigarette labels, enhance product performance, and reduce the risk of price fluctuations in raw material costs; on the other hand, it will enrich the company's product line and improve profitability.
    The functional film business is a self-developed functional film product based on FET technology, currently focusing on automotive explosion-proof and heat-insulating films. The brand "Nengmo" launched on January 16, 2015, will help the company explore new business opportunities, diversify its reliance on the cigarette label business, and cultivate new profit growth points.
    The film business has become one of the three strategic segments the company aims to develop in the future. The company will focus on building three strategic segments: "cigarette and wine label printing," "PET-based films and functional films," and "e-cigarettes." In the film business, the company will both self-develop and acquire companies with technological or product advantages (such as the acquisition of Keyi Plastic), enhancing its R&D and production capabilities for high value-added functional film products.

New business in cloud printing:
    Cloud printing is a product of the internet's penetration into the printing industry, an upgraded version of printing e-commerce. By using FTP and CTP, it improves order-taking and production efficiency while reducing intermediaries in the printing industry, allowing printing companies and consumers to gain more benefits, becoming a new direction for the printing industry. Preliminary estimates suggest that the domestic cloud printing market could reach a scale of 40 billion yuan, and various participants are still in the early stages of development, with significant opportunities for new entrants.
    The domestic cloud printing industry is just starting out, with companies like Jianhao and eprint already achieving success in Hong Kong and Taiwan. Eprint, established in 2001, has a cloud printing network platform and a mature internet cloud printing information system, along with 13 "e-print" stores and 3 "Invoice" stores, boasting over a decade of operational experience. Currently, it can deliver printed products within one to two days after ordering, achieving a market share of 45.7% among retail channel printing companies in Hong Kong by 2012. Cloud printing is essentially e-commerce, requiring successful enterprise experience in both software and hardware construction and operational services, and eprint's years of management experience will greatly assist in entering the domestic cloud printing market. #p#分页标题#e#