Behind The Pulp Molding Boom: The Dilemma And Opportunities Of Zhongxin Co., Ltd.

In the context of the continuous increase in the global "plastic ban", the pulp molding industry seems to have ushered in unprecedented opportunities. The multiple superposition of environmental protection, policies and capital makes this green track look shining.

However, when we put aside our passion and return to data and logic, we will find that this industrial wave is uneven. Policies have created short-term prosperity, but real market-oriented competition has only just begun. Zhongxin Co., Ltd. (603091), a company known as "China's pulp molding leader", is also standing at the crossroads of opportunities and risks.

The wave of environmental protection promotes "paper instead of plastic", but the industry is not yet mature

Pulp molding is not a new concept, but the real outbreak is after the gradual implementation of the global plastic restriction policy.

According to the data, more than 52.1 million tons of plastic waste are generated worldwide every year, of which only about 43% is recycled or incinerated, and the remaining part remains in the environment for a long time. In 2023, the United Nations adopted the Draft Zero Convention on Plastics, requiring countries to gradually reduce plastic production; The European Union has also proposed that all packaging must be recyclable or degradable by 2030.

China has also responded positively, with the 14th Five-Year Plan clearly stating the promotion of alternative materials such as paper products, bamboo products, and degradable plastics.

Under this policy dividend, the global pulp molding market size reached US$5.44 billion in 2024, a year-on-year increase of about 15%. However, it should be noted that the global penetration rate is only 3.4% - the industry is far from mature.

The cost advantage of pulp molding is not obvious: the price of raw materials is 4000-5000 yuan/ton, while the traditional plastic (polyethylene) is about 8000 yuan/ton, which seems cheap, but due to the complex process, labor and high energy consumption, the overall manufacturing cost is still high.

In other words, the current industry growth is more policy-driven than market-driven, and once policy support slows down, demand is highly volatile.

The growth of Zhongxin shares: leading but not resting easy

Zhongxin is undoubtedly the most representative enterprise in this industry. The company is mainly engaged in natural plant fiber molding products, covering catering packaging, industrial packaging and other fields.

As of 2024, the company's exports account for more than 85%, with major customers including McDonald's, Starbucks and Sam's Club. In the past five years, the company's revenue has grown at a compound annual growth rate of 22.79%, net profit at a compound annual growth rate of 23.89%, and an average gross profit margin of 34.89%, making it the best in the industry.

Behind this achievement is Zhongxin's unique "mold-raw material-manufacturing" integrated system. The company started in mold manufacturing, has 15 invention patents and 91 utility model patents, and its core technologies include "hot press mold special exhaust", "intelligent wet and dry transfer" and "fluorine-free and high-temperature resistance". Through automated production, the production capacity of a single machine is increased by 30%, and the energy consumption is reduced by about 15%.

But the problem is that although this system builds a moat, it also means extremely high fixed costs.

The company locked in the upstream bagasse pulp by holding Guangxi Huabao (holding 42% of the shares), and the raw material price was stable at about 4,000 yuan/ton. However, the huge investment in pulp mills, mold lines and overseas factories has made the company face heavy capital expenditures.

In the first three quarters of 2025, the company achieved total operating income of 1.056 billion yuan, a year-on-year decrease of 8.07%; net profit attributable to the parent company was 198 million yuan, down 16.16% year-on-year, mainly due to overseas trade fluctuations and difficulty in reducing fixed costs. While protecting profits, the moat also amplifies cyclical risks.

Overseas expansion: the hope of growth is still a new round of tests

In the face of uncertain factors such as Sino-US trade frictions and the US "double anti" investigation, Zhongxin began to accelerate its international layout.

By the end of 2023, the company will complete a project with an annual output of 35,000 tons of bagasse environmentally friendly tableware in Thailand, and will add 65,000 tons of production capacity in 2026, when the total overseas production capacity will exceed 100,000 tons.

The logic of the Thai project is clear: avoiding tariffs, obtaining raw materials, reducing costs. However, from an industry perspective, there are also hidden concerns about this layout.

At present, more than ten Chinese companies have laid out similar production capacity in Thailand and Vietnam. With the influx of global capital, Southeast Asia is changing from a "cost depression" to a "competitive highland". The price of sugarcane pulp raw materials has shown signs of rising, with local labor wages rising by about 12% in the past two years, and transportation costs are higher than those in coastal areas in China.

If demand in the North American market does not recover as expected in the future, these new production capacities may become a "sweet burden".

Guojin Securities expects Zhongxin's revenue in 2026 to reach 2.505 billion yuan and net profit to 568 million yuan, a year-on-year increase of nearly 92%. However, under the current global trade volatility and exchange rate pressure, this forecast seems slightly optimistic. In reality, the return on investment cycle of overseas projects usually exceeds five years, and it is difficult to realize short-term profits.

Industry competition intensifies, and the lead may be diluted

The pulp molding industry is scattered on the surface, but in fact it is undergoing a concentrated capital reshuffle.

By the end of 2024, there were more than 4,000 registered pulp molding enterprises in China, of which 66% had a registered capital of less than 5 million yuan. However, large packaging companies such as Yutong Technology and Jialian Technology have entered the market one after another, and are quickly catching up with their capital and channel advantages.

Zhongxin's technology is indeed leading, but not unrepeatable. With the popularization of automation equipment, the technical barriers to mold manufacturing are being reduced.

From the perspective of product structure, more than 80% of Zhongxin's revenue comes from disposable tableware, which has low added value and high price sensitivity, and is easily affected by industry competition. Once peer companies expand their scale or seize the market through low prices, Zhongxin's gross profit margin will face continuous pressure.

The risk remains: growth goes hand in hand with uncertainty

Looking at the growth path of Zhongxin Co., it is undoubtedly one of the most representative companies in the pulp molding industry, but future uncertainties remain significant.

First, high policy dependence. If domestic or international environmental standards are adjusted or enforcement weakens, industry demand may decline.

Second, fluctuations in raw material and energy prices. The price of sugarcane pulp remains in the 4,000–5,000 RMB/ton range, but if it exceeds this upper limit due to weather or supply chain instability, profits will be directly affected.

Third, risks in overseas expansion. The speed of capacity release in Thailand, customer development, and exchange rate fluctuations can all impact performance.

Investors should recognize that although Zhongxin's growth is stable, the balance between its valuation and performance growth is becoming delicate. Guojin Securities gives the company a 16x P/E ratio for 2026 with a target price of 88.89 RMB per share, but in the context of intensifying industry competition and a complex external environment, the market may not fully accept this valuation.

Conclusion: On the cusp of opportunity, one must maintain a steady foothold.

Pulp molding is an important direction in the global environmental transformation, but moving from policy-driven growth to market self-sufficiency will be a long process.

Zhongxin Co. indeed possesses leading technology and systematic competitiveness, but it is also caught in the multiple pressures of cyclical fluctuations, cost pressures, and international competition.

Flying high in favorable conditions is not difficult; what is challenging is to stay stable.

The real winner is not the fastest, but the company that can continue to be profitable after policy support wanes and competition intensifies.

For Zhongxin, this green revolution is just beginning, and the real test has only just arrived.