Analysis of the Gross Margin Recovery Prospects for Zhongshun Jierou (002511.SZ) Tissue Paper

Based on the above in-depth analysis, here is the complete research report:

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The gross margin of Zhongshun Jierou’s tissue paper products has declined continuously from

in 2020 to in 2024, representing a cumulative decrease of , and currently only recovering to of the 2020 level. This round of gross margin decline is mainly driven by the following factors:

Year	Gross Margin	YoY Change	Raw Material Cost Index
2020	42.35%	-	100
2021	39.82%	-2.53pp	118
2022	34.56%	-5.26pp	135
2023	32.18%	-2.38pp	128
2024	33.25%	+1.07pp	122

The gross margin stabilized and rebounded for the first time in 2024, indicating that the worst period may have passed [0].

1. Soaring Raw Material Costs
   : The pulp price index surged from 100 in 2020 to 135 in 2022, a 35% increase, which directly squeezed gross margin space
2. Overcapacity in the Industry
   : Continuous capacity expansion in the tissue paper industry has led to intensified market competition and frequent price wars
3. Weak Consumer Demand
   : The trend of consumption downgrade has been evident post-pandemic, putting pressure on the sales of high-end products
4. Rising Energy Costs
   : Energy prices rose sharply in 2022-2023, increasing manufacturing expenses

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Scenario	Annualized Recovery Rate	Core Assumptions
Optimistic Scenario	2.5pp/year	Continuous decline in pulp prices + product structure upgrading + emergence of economies of scale
Base Scenario	1.8pp/year	Moderate fluctuations in pulp prices + normal operation and management + stable market share
Conservative Scenario	1.0pp/year	High-level fluctuations in pulp prices + intensified competition + lagged cost pass-through
Pessimistic Scenario	0.5pp/year	Rebound in raw material prices + industry overcapacity + weak demand

Scenario	Time Required	Expected Recovery Time
Optimistic Scenario	3.6 years	H2 2027
Base Scenario	5.1 years	H1 2029
Conservative Scenario	9.1 years	H1 2033
Pessimistic Scenario	18.2 years	H1 2042

Assuming no major changes in the current market environment, it is expected that Zhongshun Jierou’s gross margin will not fully recover to the 2020 level of 42.35% until .

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Year	Actual/Forecast	Optimistic Scenario	Base Scenario	Conservative Scenario
2020	Actual	42.35%	42.35%	42.35%
2024	Actual	33.25%	33.25%	33.25%
2025	Forecast	35.75%	35.05%	34.25%
2026	Forecast	38.25%	36.85%	35.25%
2027	Forecast	40.75%	38.65%	36.25%
2028	Forecast	42.35%	40.45%	37.25%

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Driving Factor	Potential Contribution	Mechanism of Impact
Falling Pulp Prices	+2.5pp	Raw material costs account for approximately 60%, resulting in high price sensitivity
Product Structure Upgrading	+1.5pp	The gross margin of high-end products is 10-15 percentage points higher than that of ordinary products
Economies of Scale	+1.0pp	Increased capacity utilization reduces unit fixed costs
Channel Optimization	+0.8pp	E-commerce and emerging channels reduce intermediate costs
Improved Competitive Landscape	+0.5pp	Industry integration reduces price wars

• For every 10% decline in pulp prices
  , the gross margin can increase by approximately
  1.5-2.0 percentage points
• For every 5% increase in the proportion of high-end products
  , the gross margin can increase by approximately
  0.8-1.2 percentage points
• For every 5% increase in capacity utilization
  , the gross margin can increase by approximately
  0.3-0.5 percentage points

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1. Raw Material Fluctuation Risk
   : International pulp prices are affected by multiple factors such as exchange rates, supply chains, and geopolitics, leading to sharp fluctuations
2. Sustained Weak Demand
   : The trend of consumption downgrade may continue, affecting product pricing power
3. Intensified Competition
   : Price competition strategies from new industry entrants and existing competitors
4. Lagged Cost Pass-Through
   : Price increases take time to be passed on to the terminal, and may result in lost market share

1. Continuous Decline in Pulp Prices
   : Global pulp inventories are at a high level, demand is weak, and prices are under pressure
2. Breakthrough in High-End Products
   : Increased proportion of new categories such as cotton soft towels and wet wipes
3. Improved Channel Efficiency
   : Increased proportion of e-commerce channels reduces sales expense ratio
4. Industry Integration
   : Exit of small and medium-sized production capacity leads to improved industry structure

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Based on the analysis of current financial data and market environment, Zhongshun Jierou’s tissue paper gross margin

:

• Short-term (2025-2026)
  : The gross margin is expected to gradually rise to the range of 36-38%, still approximately 4-6 percentage points lower than the 2020 level
• Medium-term (2027-2028)
  : It may approach or reach the 2020 level under the optimistic scenario
• Long-term (2029 and beyond)
  : Breakthroughs need to rely on product structure upgrading and improved industry landscape

Investors should focus on the following indicators to track the recovery process:

1. Quarterly Gross Margin Changes
   : Two consecutive quarters of stabilization and recovery are positive signals
2. Pulp Futures Price Trends
   : Price changes of softwood pulp/hardwood pulp
3. Proportion of High-End Product Sales
   : Growth rate of high-margin products such as cotton soft towels and wet wipes
4. Market Share Changes
   : Evolution of the industry competitive landscape

For every 1 percentage point increase in gross margin, the net profit margin increases by approximately 0.6-0.8 percentage points. At the current revenue scale (approximately RMB 8.5 billion), this can increase net profit by approximately RMB 50-70 million [0].

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The chart above shows:

1. Top Left
   : Historical trend and multi-scenario forecast of gross margin from 2020 to 2028
2. Top Right
   : Time required to recover to the 2020 level under different scenarios
3. Bottom Left
   : Analysis of current recovery progress and gaps
4. Bottom Right
   : Driving factors and potential contributions to gross margin recovery

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[0] Jinling AI Financial Database - Financial Data, Real-Time Quotes, and Financial Analysis Report for Zhongshun Jierou (002511.SZ)