Core Viewpoint - Nine Dragons Paper's FY25 results met expectations, with a revenue increase of 6.3% YoY to Rmb63.24 billion and a net profit attributable to shareholders of Rmb1.77 billion, reflecting a significant 176% HoH increase in 2HFY25 [1]. Sales and Production Trends - The company reported a total sales volume increase of 10% YoY to 21.5 million tonnes in FY25, driven by growth in kraft paper (+1.10 million tonnes), ivory board (+500,000 tonnes), and P&W paper (+400,000 tonnes) [1]. - For FY26, the company has commissioned 1.2 million tonnes of ivory board paper, 350,000 tonnes of P&W paper, and 700,000 tonnes of chemical pulp in 1HFY26, with plans for an additional 350,000 tonnes of P&W paper within the year [2]. - Forecasts indicate paper production and sales volume will increase by over 5% YoY in FY26, with plans to commission 700,000 tonnes of ivory board paper in Chongqing and another 500,000 tonnes in Tianjin in 1HFY27 [3]. Pricing and Profitability - The company anticipates a near-term recovery in linerboard and corrugated board prices, estimating profit per tonne (before interest on perpetual bonds) at Rmb59 in 1HFY25 and Rmb151 in 2HFY25, with the latter benefiting from increased self-produced pulp output and lower thermal coal prices [4]. - Price hikes for linerboard and corrugated board have been progressing since July, supported by improving industry demand and rising domestic wastepaper prices, although costs per tonne have slightly increased due to rising coal and wastepaper prices [4]. Capital Expenditure and Financial Outlook - In FY25, the company's capex reached Rmb14.8 billion, a 15.7% YoY increase, while the debt-to-asset ratio rose by 1 percentage point YoY to 66%. For FY26, capex is guided at Rmb11 billion, reflecting ongoing expansion efforts [5]. - Following the implementation of cost-cutting and efficiency measures, earnings forecasts for FY26 and FY27 have been raised by 11% and 15% to Rmb2.75 billion and Rmb2.88 billion, respectively. The stock is currently trading at 0.5x and 0.4x P/B, with a target price increase of 17% to HK$7, indicating a 22% upside [5].
NINE DRAGON SPAPER(02689.HK)：EARNINGS TO IMPROVE IN 2HFY25