Household paper market to maintain a steady growth, mandatory attributes prominent. As a necessary consumer goods, the demand for household paper is rigid, and the scale has entered a stable growth stage. In 2019, the scale of domestic household paper market was 119.89 billion yuan, with a year-on-year growth of 2.7%, and the compound annual growth rate from 2014 to 2019 was 7.6%.

From the point of view of volume and price, the growth of consumption is the main driving force for the stable growth of the paper industry. In terms of sales volume, the sales volume of household paper in 2019 was 10.354 million tons, up by 8.0% year on year, and the compound annual growth rate from 2014 to 2019 was 7.2%. From the perspective of unit price, the unit value of household paper is relatively low. From 2009 to 2019, the average price of household paper in the market ranges from 10,000 yuan/ton to 13,500 yuan/ton, with a compound growth rate of 1.5% in ten years. In the first half of 2021, household paper base paper continued to rise in price, the main reason is that the price of raw materials rose sharply, increasing the pressure on paper enterprises to become basic; In the second half of the year, with the decline of pulp price and the intensification of industry competition, the terminal promotion is relatively strong.

Per capita consumption is rising and we think the ceiling is still high. From the separation of volume and price of household paper, the major driving force of the industry comes from the growth of consumption, which can also be seen from the per capita consumption of household paper in China. In 2019, the per capita consumption of household paper in China was 6.9 kg/person, up 7.8% year on year, and the compound annual growth rate from 2009 to 2019 was 8.0%. The trend of continuous growth. Compared with the average annual consumption of 18 kg/person in Hong Kong, 16 to 20 kg/person in Japan and South Korea, and 22+ kg/person in Europe and the United States, the ceiling of the consumption of household paper per person in China is expected to remain high.

We believe that the continuous growth of household paper consumption is mainly attributable to the improvement of consumer health awareness, the enhancement of consumption power, and the refinement of product application scenarios.

1) Improvement of health awareness: from 2009 to 2020, the total expenditure on personal health increased from 657.12 billion yuan to 1995.94 billion yuan, with an average annual compound growth of 10.6%, which fully reflects the rapid improvement of residents' awareness of personal health.

2) Improvement of consumption power: In recent years, China's per capita disposable income has shown a steady growth momentum. In 2021, the per capita disposable income of national residents was 35128.0 yuan, a year-on-year growth of 9.1%, and the compound average annual growth rate from 2013 to 2021 was 8.5%, reflecting the gradual improvement of Chinese residents' consumption power. In addition, the increasing proportion of wood pulp used as a raw material for household paper reflects the growing consumer demand for higher quality paper products. At the same time, disposable paper products are gradually replacing reusable handkerchiefs and other products, leading to a gradual increase in consumption of household paper.

3) Elaboration of application scenarios: From the perspective of product structure, facial tissue, kitchen paper, wet toilet paper and other emerging paper products are rising. From 2012 to 2019, the proportion of facial tissue, toilet paper and kitchen paper increased by 6.8pct, 2.0pct and 0.5pct respectively, reflecting the differentiation of paper products application scenarios and the refining of consumer demand. Broaden the application field of disposable paper, driving the rapid expansion of the overall scale of the industry.