Financial Performance - The group's sales increased by 14.0% to approximately 11.4 million tons[3] - Revenue rose by 9.3% to approximately RMB 33,464.6 million[3] - Gross profit increased by 18.1% to approximately RMB 3,194.3 million[3] - Profit after tax surged by 124.9% to approximately RMB 680.3 million[3] - Profit attributable to equity holders increased by 60.6% to approximately RMB 469.6 million[3] - Basic earnings per share rose by 66.7% to approximately RMB 0.10[6] - Total comprehensive income for the period reached RMB 889.2 million, compared to RMB 73.1 million in the previous period[8] - Operating profit for the period was approximately RMB 1,596.9 million, reflecting a year-on-year increase of 28.4% driven by higher gross profit[59] - Net profit after tax increased from approximately RMB 302.5 million in the same period last year to approximately RMB 680.3 million, an increase of about RMB 377.7 million or 124.9%[63] - Profit attributable to equity holders increased from approximately RMB 292.4 million to approximately RMB 469.6 million, an increase of about RMB 177.1 million or 60.6%, mainly due to increased revenue and gross profit[64] Revenue and Sales - Revenue for the six months ended December 31, 2024, was RMB 33,464,611 thousand, an increase of 9.6% from RMB 30,611,229 thousand in the same period of 2023[23] - Sales of packaging paper reached RMB 30,435,375 thousand, up 8.1% from RMB 28,146,246 thousand year-on-year[23] - Revenue for the period reached RMB 33,465 million, a year-on-year increase of 9.3%, primarily from the packaging paper business, which accounted for approximately 90.9% of total revenue[51] Costs and Expenses - The cost of raw materials and consumables used was RMB 26,067,923 thousand, an increase of 4.7% from RMB 24,903,111 thousand in the previous year[24] - Sales and marketing expenses increased by approximately 12.0% to RMB 1,244.7 million, attributed to expanded coverage and costs associated with new production lines in Guangxi[56] - Administrative expenses rose by about 17.1% to RMB 1,207.3 million, mainly due to additional management costs for expansion projects in Guangxi[58] - Financial expenses net increased by 27.8% to approximately RMB 771.7 million, primarily due to an increase in total loans to support expansion projects[60] Assets and Liabilities - Total assets increased to RMB 143,298.4 million from RMB 138,371.5 million[10] - Total liabilities rose to RMB 94,124.2 million from RMB 89,887.0 million[11] - The net book value of property, plant, and equipment as of December 31, 2024, was RMB 101,055,731,000, an increase from RMB 91,601,729,000 as of December 31, 2023, indicating a growth of 10.5%[36] - Total inventory as of December 31, 2024, was RMB 9,522,526,000, down from RMB 10,169,308,000 as of June 30, 2024, showing a decrease of 6.4%[37] - Trade receivables increased to RMB 4,109,623,000 as of December 31, 2024, from RMB 3,565,687,000 as of June 30, 2024, marking an increase of 15.2%[39] - The company's total loans as of December 31, 2024, amounted to RMB 68,318,900,000, compared to RMB 67,179,081,000 as of June 30, 2024, reflecting a slight increase of 1.7%[41] - Trade payables rose to RMB 5,627,419,000 as of December 31, 2024, from RMB 4,745,359,000 as of June 30, 2024, representing an increase of 18.5%[43] Taxation - Total income tax expense for the six months was RMB 251,871 thousand, a decrease of 14.7% from RMB 295,418 thousand in the same period last year[26] - Income tax expense for the period was approximately RMB 251.9 million, a decrease of about 14.7% or RMB 43.5 million compared to the same period last year[61] - The company's subsidiaries in mainland China are subject to a corporate income tax rate of 25%, with some qualifying for a reduced rate of 15%[27] Future Outlook and Strategy - The company is expanding its production capacity, with total designed annual capacity for fiber raw materials projected to reach 8.19 million tons and paper production capacity to 25.37 million tons after ongoing projects are completed[49] - Capital expenditures include investments in Guangxi and Hubei provinces, targeting an annual designed capacity of 3.05 million tons for pulp and 3.70 million tons for paper[50] - The company aims to enhance cost control and brand competitiveness through a deepened integration strategy in the pulp and paper sector, while also focusing on technological innovation and resource integration[74] - The company plans to drive quality improvement and efficiency through big data, while adhering to prudent financial strategies for sustainable development[74] - The board will continue to monitor the loan portfolio and compare existing loan spreads with current market rates to manage interest rate risks[71] Dividends - The company will not declare an interim dividend for the six months ended December 31, 2024[75] Accounting Standards - The group is currently assessing the impact of new accounting standards that have been issued but are not yet effective[20]

Investment Rating - The report assigns a "Buy" rating for Nine Dragons Paper (2689.HK) based on its strong revenue growth and improving profitability outlook [18]. Core Views - The company is expected to achieve a revenue of 29.134 billion yuan in FY2024H2 (January to June 2024), representing a year-on-year increase of 13.8%. The net profit attributable to shareholders is projected to be 4.58 billion yuan, a significant year-on-year increase of 146.1% [18]. - The report highlights that the company's sales volume increased by 1.6 million tons year-on-year to 9.6 million tons, with a net profit per ton of 45 yuan, reflecting a quarter-on-quarter increase of 10 yuan per ton [18]. - The report anticipates a gradual recovery in demand driven by seasonal factors and downstream inventory replenishment, with expected monthly sales growth in Q4 2024 [18]. Summary by Sections Financial Performance - The total revenue for 2023 was 56.739 billion yuan, with a projected growth rate of -12% year-on-year. For 2024, the revenue is expected to increase to 59.496 billion yuan, reflecting a growth rate of 5% [20]. - The net profit attributable to shareholders for 2023 was -2.383 billion yuan, with a forecasted recovery to 751 million yuan in 2024, representing a year-on-year growth of 131% [20]. - The report projects earnings per share (EPS) to improve from -0.51 yuan in 2023 to 0.16 yuan in 2024, with a price-to-earnings (P/E) ratio of 19.09 [20]. Market Dynamics - The report notes that the demand for boxboard and corrugated paper is closely correlated with macroeconomic indicators such as retail sales and GDP growth, with expectations for economic recovery in 2025 to boost demand [18]. - Supply-side dynamics indicate that leading companies are expected to add over 2 million tons of new capacity in 2024, which may alleviate supply pressure [18]. - The report emphasizes the importance of product structure optimization and the acceleration of integrated pulp and paper layout, with total pulp and paper capacity expected to reach 25.37 million tons by mid-2025 [18].

Financial Performance - For the fiscal year ending June 30, 2024, the company reported revenue of RMB 59,496.4 million, an increase of 4.9% compared to RMB 56,739.4 million in the previous year[5]. - Gross profit surged to RMB 5,711.5 million, reflecting a significant increase of 273.2% from RMB 1,530.2 million in the prior year[5]. - Operating profit turned positive at RMB 2,645.1 million, compared to an operating loss of RMB 1,595.2 million in the previous year[5]. - The company achieved a net profit attributable to equity holders of RMB 750.7 million, a turnaround from a loss of RMB 2,383.4 million in the previous year[5]. - Total assets increased by 14.7% to RMB 138,371.5 million from RMB 120,651.0 million year-on-year[5]. - Total equity rose by 7.4% to RMB 48,484.5 million compared to RMB 45,136.4 million in the previous year[5]. - The gross margin improved to 9.6%, up by 6.9 percentage points from 2.7% in the previous year[5]. - In the fiscal year 2024, the group achieved a significant sales volume increase of 18.3% and a revenue growth of 4.9%, reaching RMB 59,496.4 million[27]. - The gross profit surged by 273.2% year-on-year, with the gross profit margin increasing by 6.9 percentage points, successfully turning a profit[27]. - The net profit for the fiscal year 2024 was RMB 793.9 million, a turnaround from a net loss of RMB 2,370.8 million in 2023[48]. Operational Efficiency - The company is enhancing its operational efficiency through comprehensive cost reduction measures and optimizing inventory management[24]. - The company is focused on high-value product development to enhance product competitiveness and market share[24]. - The company plans to enhance its market share and solidify its industry leadership through a focus on integrated pulp and paper strategies[47]. - The company is actively monitoring raw material supply and prices to improve resource utilization efficiency[27]. - The company is committed to sustainable development by implementing a comprehensive management system and promoting green low-carbon practices[24]. Product Offerings - The company offers a range of products including high-strength corrugated core paper with a basis weight range of 45-180 g/m², which helps reduce packaging weight and shipping costs[12]. - Coated white cardboard is produced with a basis weight range of 180-550 g/m², designed for high-quality printing applications such as packaging for consumer goods[12]. - The company provides food-grade white cardboard with a grammage range of 150-320 g/m², suitable for making various types of paper cups and food packaging[10]. - The environmentally friendly kraft paper is made from 100% recycled paper, catering to customers' cost-effective and eco-friendly requirements[10]. - The company has developed a range of new products to meet diverse customer needs, including lightweight and high-strength packaging solutions[19]. Capital Expenditures and Investments - Capital expenditures decreased by 27.6% to RMB 12,818.9 million from RMB 17,697.6 million in the previous year[5]. - The company plans to increase wood pulp production capacity by 3.05 million tons by 2025, with projects in Guangxi and Hubei provinces[29]. - The group plans to add a total annual production capacity of 3.70 million tons through expansion projects, expected to be completed between Q3 2024 and Q2 2025[30]. - The company has increased its capital expenditure for expanding production capacity of wood pulp, recycled pulp, and wood fiber, leading to a higher financial risk due to rising loan interest rates amid global inflation[64]. Environmental Sustainability - The company continues to focus on environmental sustainability by using recyclable waste paper as a primary raw material in its production processes[50]. - The company has implemented a waste water recycling rate of over 97.2% in the fiscal year 2024, maintaining a target of over 97.5%[72]. - The company has achieved a greenhouse gas density of 9,048 tons of CO2 equivalent per 10,000 tons of paper in the fiscal year 2024, down from 9,330 tons of CO2 equivalent in the fiscal year 2020[67]. - The company aims to reduce sulfur dioxide density to below 0.84 tons per 10,000 tons of paper by the fiscal year 2025, down from 0.94 tons in the fiscal year 2020[68]. - The company has recycled over 14 million tons of waste paper in both the fiscal year 2020 and the fiscal year 2024, with a target of over 16 million tons by the fiscal year 2030[73]. Risk Management and Governance - The company has established a comprehensive governance framework to address climate change risks and comply with stricter environmental standards[65]. - The board regularly reviews the company's overall strategy, risk management, and sustainable development issues, ensuring alignment with environmental, social, and governance (ESG) goals[54]. - The company has adopted the corporate governance code as per the listing rules, ensuring compliance throughout the fiscal year[179]. - The board of directors consists of 13 members, including 8 executive directors and 5 independent non-executive directors[180]. - The company has maintained a high level of attendance at board meetings, with the chairman attending all 5 board meetings[183]. Employee Welfare and Training - The company provides a variety of health and wellness facilities for employees, including gyms and sports fields, to promote work-life balance[130]. - The average training hours per employee increased to 18.0 hours in the fiscal year 2024, up from 17.1 hours in fiscal year 2023[141]. - Total training hours conducted by the company reached 457,380 hours in fiscal year 2024, compared to 375,649 hours in fiscal year 2023, representing a 21.7% increase[142]. - The company emphasizes the importance of employee morale and development through various training programs and career advancement opportunities[141]. - The employee turnover rate was 55% in the United States, 14% in China, 17% in Vietnam, and 22% in Malaysia[133]. Community Engagement and Social Responsibility - The company donated over RMB 16 million to various charitable activities during the fiscal year[159]. - In the 2023 "6.30" event, the company contributed RMB 12 million to support rural revitalization efforts, including education and infrastructure improvements[160]. - The company has cumulatively donated over RMB 310 million to rural revitalization projects over the years, receiving the "Guangdong Poverty Alleviation Red Cotton Cup" for thirteen consecutive years[160]. - The company actively engages in community investment and focuses on understanding community needs[173]. Compliance and Quality Control - The company has implemented strict procurement principles to avoid materials that negatively impact the environment and climate change[149]. - The company has a 100% response rate for customer complaints, with a commitment to resolve issues within three working days for local complaints and five working days for remote or out-of-province complaints[152]. - The company emphasizes quality control through ISO 9000 and ISO 14000 certifications, ensuring no harmful substances are added during production[150]. - The company has not reported any incidents of customer personal data leakage during the year[154].

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of HKD 3.38 [4] Core Views - The company is in the final stage of its capacity expansion phase, with capital expenditures expected to slow down significantly by FY2026 [4] - The company's total designed capacity is projected to increase by 370 million tons to 25.37 million tons by FY2025, driven by expansions in Guangxi and Hubei [4] - The company's cost pressure is expected to ease due to the decline in overseas hardwood pulp prices, and paper prices are anticipated to stabilize and rise in the second half of the year [4] - The company's revenue is forecasted to grow by 9.1%, 6.9%, and 6.6% in FY2025, FY2026, and FY2027, respectively, with net profit expected to increase by 66.7%, 30.4%, and 24.6% over the same period [4] Financial Performance - FY2024 revenue increased by 4.9% YoY to RMB 59.5 billion, with net profit turning positive to RMB 751 million [5] - Sales volume for FY2024 grew by 18.3% YoY to 19.6 million tons, driven by strong performance in cardboard sales [5] - Average selling price in H2 FY2024 decreased by RMB 64/ton to RMB 2,997/ton, with mixed performance across product categories [5] - The company's fiber raw material capacity increased by 520,000 tons to 5.14 million tons, with further expansions expected in Guangxi and Hubei [5] - FY2024 operating cash flow was negative RMB 794 million, primarily due to a significant increase in bank acceptance bills [5] Financial Projections - Revenue is projected to reach RMB 64.9 billion, RMB 69.3 billion, and RMB 73.9 billion in FY2025, FY2026, and FY2027, respectively [6] - Net profit is expected to grow to RMB 1.26 billion, RMB 1.66 billion, and RMB 2.08 billion over the same period [6] - Gross margin is forecasted to improve from 9.6% in FY2024 to 10.6% by FY2027, with net margin increasing from 1.3% to 2.9% [6] - ROE is expected to rise from 1.5% in FY2024 to 4.0% by FY2027 [6] Balance Sheet and Cash Flow - Total assets are projected to grow from RMB 138.4 billion in FY2024 to RMB 166.7 billion by FY2027 [8] - Cash and cash equivalents are expected to increase from RMB 10.7 billion in FY2024 to RMB 20.6 billion by FY2027 [8] - Operating cash flow is forecasted to turn positive in FY2025, reaching RMB 9.35 billion, and continue to grow in subsequent years [11] - Capital expenditures are expected to decline significantly from FY2026 onwards, supporting debt repayment [4]

Investment Rating - The report maintains a "Buy" rating for Nine Dragons Paper (02689) [3] Core Views - Nine Dragons Paper's FY2024 performance met expectations with revenue of RMB 59.496 billion, up 4.9% YoY, and net profit attributable to shareholders of RMB 751 million, turning from a loss to a profit [3] - The company achieved a sales volume of 19.6 million tons, up 18.3% YoY, with a profit per ton of RMB 38 [3] - In H2 FY2024, revenue was RMB 28.885 billion, up 13.1% YoY, with net profit attributable to shareholders of RMB 458 million and a profit per ton of RMB 48 [3] - The company's strategic layout in pulp-paper integration and product diversification is gradually showing results, with significant improvement in profitability [3] - The company's capacity expansion is progressing, with new capacities in chemical pulp, mechanical pulp, and cultural paper expected to further stabilize profitability [3] Financial Performance - FY2024 revenue breakdown by product: corrugated paper RMB 33.035 billion (+17.7% YoY), white board paper RMB 8.148 billion (-4.1% YoY), cultural paper RMB 4.134 billion (-12.0% YoY) [3] - FY2024 sales volume breakdown: corrugated paper 11.1 million tons (+32.9% YoY), white board paper 2.7 million tons, cultural paper 0.7 million tons [3] - The company's debt-to-asset ratio rose to 65.0% at the end of FY2024, up 2.4 percentage points YoY, due to large-scale capacity expansion [3] - FY2024 operating cash flow was a net outflow of RMB 794 million, but improved significantly in H2 with a net inflow of RMB 1.719 billion [5] Future Outlook - The company plans capital expenditure of RMB 12.8 billion in FY2025, similar to FY2024, with expectations of a gradual improvement in the debt-to-asset ratio from FY2026 onwards [3] - The company's profit per ton is expected to continue improving, supported by pulp-paper integration and product diversification strategies [3] - The report forecasts FY2025-2027 net profit attributable to shareholders at RMB 1.444 billion, RMB 2.234 billion, and RMB 3.243 billion, respectively, with PE ratios of 10.9X, 7.1X, and 4.9X [5] Industry Analysis - The paper industry is expected to see improved supply-demand dynamics as downstream demand recovers, import paper impact eases, and leading paper companies slow down new capacity additions [5] - Leading companies with advantages in raw materials, scale, and management are expected to continue consolidating the market [5]

Financial Performance - Sales volume increased by approximately 18.3%[2] - Revenue rose by approximately 4.9% to RMB 59,496.4 million, primarily due to the increase in sales volume for the fiscal year 2024[2] - Gross profit surged by approximately 273.2% to RMB 5,711.5 million[2] - Profit attributable to equity holders of the company for the fiscal year 2024 was approximately RMB 750.7 million[2] - Basic earnings per share for the fiscal year 2024 were approximately RMB 0.16[2] - The company reported a total comprehensive income of RMB 523.4 million for the fiscal year 2024, compared to a loss of RMB 2,275.1 million in the previous year[5] - The company reported a net profit of RMB 793,890 thousand for the year ending June 30, 2024, compared to a net loss of RMB (2,370,839) thousand in the previous year, indicating a significant turnaround[9] - The operating profit for fiscal year 2024 was approximately RMB 2,645.1 million, a turnaround from an operating loss of RMB 1,595.2 million in fiscal year 2023[48] - The company's net profit attributable to equity holders for fiscal year 2024 was approximately RMB 750.7 million, compared to a net loss of RMB 2,383.4 million in fiscal year 2023[51] Assets and Liabilities - Total assets increased to RMB 138,371.5 million from RMB 120,651.0 million year-on-year[8] - Non-current assets, including property, plant, and equipment, rose to RMB 95,462.9 million from RMB 86,557.2 million[7] - Total liabilities increased to RMB 89,887.0 million from RMB 75,514.6 million year-on-year[8] - Long-term bank and other loans increased to RMB 52,326.7 million as of June 30, 2024, compared to RMB 43,180.7 million in the previous year[37] - The company’s total loans reached RMB 67,179.1 million, an increase from RMB 56,773.3 million in the previous year[37] Cash Flow and Expenses - Cash and cash equivalents stood at RMB 10,560.7 million, compared to RMB 10,317.5 million in the previous year[7] - The company reported a net cash outflow from operating activities of RMB (794,199) thousand, a significant decrease from RMB 6,924,487 thousand in the previous year[9] - Financial expenses increased to RMB (1,568,765) thousand from RMB (1,288,915) thousand, indicating a rise of approximately 21.7% year-over-year[16] - The company incurred operating expenses of RMB 48,463,322 thousand for raw materials and consumables, compared to RMB 45,959,412 thousand in the previous year, which is an increase of approximately 5.5%[15] - The total interest and financing costs rose from RMB 2,035.8 million in the previous fiscal year to approximately RMB 2,317.0 million in the current fiscal year[58] Inventory and Receivables - The company’s total inventory as of June 30, 2024, was RMB 10,169,308,000, an increase from RMB 8,855,674,000 in the previous year[30] - The inventory level rose by approximately 14.8% to about RMB 10,169.3 million as of June 30, 2024, with raw materials accounting for approximately RMB 6,303.8 million[52] - As of June 30, 2024, accounts receivable and notes receivable amounted to RMB 8,482.3 million, an increase of approximately 90.2% compared to RMB 4,460.1 million as of June 30, 2023[53] - Accounts receivable from trade increased to RMB 3,565.7 million as of June 30, 2024, up from RMB 3,086.4 million the previous year[32] Corporate Governance - The board of directors consists of eight executive directors and four independent non-executive directors[66] - The company is led by Chairwoman Zhang Yin[66] - The company emphasizes its commitment to corporate governance[66] - The board composition reflects a balance between executive and independent oversight[66] - The company aims to enhance transparency and accountability[66] Strategic Initiatives - The company is focused on expanding its market presence in the packaging paper and specialty paper sectors, leveraging its production capabilities to enhance revenue growth[10] - The company plans to increase its annual production capacity by 3.70 million tons for white card paper and cultural paper, with completion expected between Q3 2024 and Q2 2025[42] - The company has ongoing expansion projects, including a new pulp production capacity of 1.10 million tons in Beihai, Guangxi, expected to be completed in Q3 2024[40] - The company plans to balance production and sales while enhancing technological innovation and resource integration to provide differentiated high-quality products[59] Dividends - The company did not recommend a final dividend for the year ended June 30, 2024, consistent with no dividend declared in the previous year[26] - The company has decided not to declare any interim or final dividends for the fiscal year ending June 30, 2024[60] Market Performance - The company reported a significant sales volume increase of 18.3% year-on-year, with total sales revenue rising by 4.9% to RMB 59,496.4 million[39] - Sales of packaging paper reached RMB 54,609,046 thousand, up from RMB 51,009,294 thousand, reflecting an increase of about 5.1% year-over-year[14] - The company's sales revenue for the fiscal year 2024 was approximately RMB 59,496.4 million, an increase of about 4.9% compared to fiscal year 2023[43] - The sales volume reached approximately 19.6 million tons, an increase of about 18.3% from 16.6 million tons in fiscal year 2023[43]

Summary of Conference Call Company/Industry Involved - The conference call involves 九龙职业 (Jiulong Vocational) and its recent developments [1] Core Points and Arguments - The speaker, 温总 (Mr. Wen), introduced the current situation and recent updates regarding the company [1] Other Important but Possibly Overlooked Content - The call emphasizes the importance of communication and updates with stakeholders [1]

Investment Rating - Buy rating is assigned to the company, with a target price of HKD 3.21 [4] Core Views - The company is the global leader in paper production capacity, with significant scale effects and strong upward elasticity [6] - The company's profitability is on a continuous improvement trajectory, driven by the gradual commissioning of raw material production capacity, easing of capital expenditures, and falling coal prices [2] - The company is expected to achieve net profits of RMB 676 million, RMB 1.911 billion, and RMB 2.791 billion in FY2024, FY2025, and FY2026, respectively, with significant year-on-year growth [6] Industry Overview - The boxboard and corrugated paper industry is in a weak supply-demand balance, with raw materials forming a competitive barrier [2] - Demand for boxboard and corrugated paper is slowly recovering, with economic relevance and indirect exports contributing to demand [2] - Supply-side improvements are expected in 2024, with limited new capacity additions and a focus on high-end boxboard paper [2] - The industry's operating rate is projected to be 63.6% in 2024, up 0.7 percentage points year-on-year, indicating a slight improvement in supply-demand dynamics [2] Company Analysis - The company has a leading position in the boxboard and corrugated paper industry, with a 23.4% market share in 2022 [2] - The company has a well-established domestic and overseas production base layout, with significant transportation advantages [2] - The company's raw material production capacity is gradually coming online, reshaping its integrated industrial chain advantage [2] - Capital expenditures are slowing, and capacity utilization is improving, which will help reduce depreciation and financial pressure [2] - Falling coal prices are expected to enhance the cost advantage of the company's self-owned power plants [2] Financial Projections - Revenue is expected to grow to RMB 59.832 billion, RMB 69.404 billion, and RMB 78.835 billion in FY2024, FY2025, and FY2026, respectively [3] - Net profit is projected to turn positive in FY2024, with significant growth in FY2025 and FY2026 [3] - The company's PE ratios for FY2024-2026 are estimated at 20.2x, 7.1x, and 4.9x, respectively, with a PB ratio of 0.31x, indicating undervaluation [6] Key Assumptions - Sales volume is expected to grow steadily, reaching 19.22 million tons, 21.21 million tons, and 23.37 million tons in FY2024-2026, respectively [9] - Gross margins are projected to improve, reaching 9.3%, 10.7%, and 11.3% in FY2024-2026, respectively [9] - Tonnage profits are expected to increase, with tonnage gross profits of RMB 289, RMB 350, and RMB 382 in FY2024-2026, respectively [9] Differentiating Factors - The market has overlooked the company's operational improvements, focusing more on industry beta [10] - The company's high-profit product mix is gradually increasing, and its product matrix is becoming more diversified, which will enhance profitability and stability [10] - Capital expenditures are expected to slow after FY2024, and the debt-to-asset ratio is projected to improve starting in FY2025 [10] - Falling coal prices will enhance the cost advantage of the company's self-owned power plants [10]

Investment Rating - The report initiates coverage with a "Buy" rating for the company [3][5]. Core Views - The company is positioned as a leading player in the packaging paper industry, with expectations for profit elasticity due to improving industry supply-demand dynamics, quality raw materials, and reduced capital expenditure pressures [3][8]. - The projected net profit for FY2024-2026 is estimated at 780 million, 2.68 billion, and 3.35 billion RMB, respectively, indicating a turnaround from negative to positive growth of +242% and +25% year-on-year [3][12]. Financial Summary - Revenue for the company from 2020 to 2026 is projected to grow from 51.34 billion RMB in 2020 to 80.81 billion RMB in 2026, with a notable decline of 12% in 2023 followed by a recovery [2][11]. - Gross profit is expected to improve from 1.53 billion RMB in 2023 to 9.54 billion RMB in 2026, reflecting a recovery in profitability [2][10]. - The company’s net profit is forecasted to recover from a loss of 238 million RMB in 2023 to 3.35 billion RMB in 2026, showcasing significant growth potential [2][12]. Industry Position - The company is recognized as the largest producer of boxboard paper in Asia, with a diverse product line including various types of packaging paper and a strong market presence in mainland China [15][19]. - The company has a well-established supply chain, covering upstream raw materials and downstream packaging factories, which enhances its competitive edge [3][8]. Growth Outlook - The report highlights that the peak of capital expenditure has passed, with expectations for a reduction in depreciation pressure and an increase in profit margins as the company enters a harvest phase [28]. - The company’s sales structure indicates that 49.5% of revenue comes from card paper products, with a strong focus on high-strength corrugated core paper and coated gray bottom whiteboard paper [18][19]. Valuation - The target price for the company is set at 4.4 HKD per share, based on a cautious approach using both PE and PB valuation methods [13][14].

Financial Performance - The company reported a significant increase in revenue, achieving a total of HKD 10.5 billion for the interim period, representing a 15% year-over-year growth[2]. - The Group achieved a sales volume increase of 16.3% to 10.0 million tonnes during the period, marking a record high[41]. - Revenue for the six months ended December 31, 2023, was RMB 30,611,229, a decrease of 1.9% compared to RMB 31,198,020 in the same period of 2022[95]. - Gross profit for the period was approximately RMB 2,705.6 million, an increase of approximately RMB 2,019.5 million or 294.4% compared to RMB 686.1 million in the corresponding period last year[51]. - Operating profit for the Period was approximately RMB 1,243.5 million, a significant increase from an operating loss of RMB 861.6 million in the corresponding period last year[52]. - Profit attributable to the equity holders of the Company amounted to approximately RMB 292.4 million, compared to a loss of RMB 1,388.8 million in the same period last year, mainly due to an increase in gross profit margin[55]. - The gross profit margin improved to 25%, up from 22% in the previous year, reflecting better cost management and pricing strategies[2]. Market Expansion and Product Development - User data indicates a growing customer base, with an increase of 12% in the number of active clients compared to the previous year[2]. - The company has provided a positive outlook for the next quarter, projecting a revenue growth of 10% to 12% based on current market trends and demand[2]. - New product development includes the introduction of eco-friendly kraftlinerboard made from 100% recycled paper, catering to environmentally conscious customers[6]. - The company is expanding its market presence in Southeast Asia, targeting a 20% increase in market share within the next fiscal year[2]. - A strategic acquisition of a local competitor is planned, which is expected to enhance production capacity by 15%[2]. - The company is investing in new technology to improve production efficiency, aiming for a 10% reduction in operational costs by the end of the fiscal year[2]. - The company aims to enhance product differentiation and tap into high-end markets to increase market share[41]. Sustainability and Environmental Commitment - The management emphasized a commitment to sustainability, with plans to increase the use of recycled materials in production to 50% by 2025[2]. - The Group's greyboard products, made from recycled waste paper, are classified into Land Dragon and Sea Dragon to cater to different customer needs[20]. - Uncoated woodfree paper and office paper are offered in weights of 40 to 80g/m2, with the latter being made from 100% recycled fiber for environmental sustainability[24][25]. - The Group's sales of recycled products qualified for an incentive tax arrangement, allowing a deduction of 10% from taxable income starting January 1, 2021[192]. Financial Position and Cash Flow - As of December 31, 2023, total assets amounted to RMB 128,912,302, an increase from RMB 120,651,004 as of June 30, 2023[91]. - Total liabilities rose to RMB 83,702,803 from RMB 75,514,582 as of June 30, 2023[92]. - The company had bank and cash balances, short-term bank deposits, and restricted cash amounting to approximately RMB 7,435.5 million as of December 31, 2023, with total undrawn bank facilities of approximately RMB 42,323.8 million[57]. - The net decrease in cash and cash equivalents for the period was RMB (3,032,656) thousand, compared to RMB (1,354,546) thousand in the same period of 2022[106]. - The company reported a significant decrease in cash flows from investing activities, primarily due to payments for property, plant, and equipment totaling RMB (6,602,715) thousand[104]. Governance and Risk Management - The company continued to comply fully with the Corporate Governance Code as set out in Appendix C1 to the Listing Rules[58]. - The company has established a Risk Management Committee to oversee risk management and internal control processes[63]. - The Group's financial activities are exposed to various risks, including foreign exchange risk, interest rate risk, credit risk, and liquidity risk[115]. - The Group aims to maintain sufficient cash and cash equivalents and committed credit facilities to manage liquidity risk effectively[119]. - The Group has not made any changes to its risk management policies during the six months ended December 31, 2023[115]. Shareholder Information - As of December 31, 2023, the total number of ordinary shares issued by the company is 4,692,220,811[75]. - Ms. Cheung Yan and Mr. Liu Ming Chung each hold a total of 3,113,811,942 shares, representing approximately 66.36% of the company's total shareholdings[74]. - The Board has resolved not to declare an interim dividend for the six months ended 31 December 2023, consistent with the previous year where no dividend was declared[69].