Group 1 - Citi has upgraded Lee & Man Paper Manufacturing (02314) from "Sell" to "Buy," raising the target price by 75% from HKD 2.4 to HKD 4.2, based on the assessment that the profitability cycle in the paper industry has bottomed out and is gradually improving [1] - The current price of Lee & Man Paper corresponds to a forecasted price-to-earnings ratio of 8 times, offering a dividend yield of 4.2%, indicating attractive valuation [1] - Although Lee & Man's profit growth may not match that of its peer Nine Dragons Paper (02689), a recent profit warning from Nine Dragons signals that the overall profitability of the paper industry is not expected to deteriorate further in the second half of 2025 [1] Group 2 - The recovery in Lee & Man's profitability is expected to be driven primarily by the rebound in profit margins for corrugated paper and sanitary paper, with a projected significant expansion of gross margin by 4.3 percentage points year-on-year in the second half of 2025, and an increase of 1.1 percentage points compared to the first half [1] - Sales are anticipated to recover, with a projected year-on-year increase of 5.9% in the second half of 2025, reaching approximately HKD 14.288 billion, reversing the decline recorded in the first half due to falling product prices [1] - Lee & Man is expected to announce its full-year results for 2025 in early March 2026, which could serve as a positive catalyst for the stock price [2]
花旗：上调理文造纸评级至“买入” 目标价上调至4.2港元