CICC(SH:601995)2025-02-08 12:38Investment Rating - The report suggests a positive outlook for the paper industry in the first half of 2025, recommending to buy on dips due to expected improvements in performance for leading companies [2][5][16]. Core Insights - The paper industry is expected to see a balanced supply-demand situation in 2025, with new capacity mainly in specialty paper and white card paper, leading to potential oversupply risks [2][3]. - Despite the industry's profitability being at historical lows, many companies continue to expand production due to changes in macroeconomic funding and local government incentives [2][5]. - The report highlights the significant cost advantages of Sun Paper's integrated model in Laos, which is expected to contribute 5 to 10 billion RMB in net profit in 2024, accounting for about 25% of the company's total net profit [24][25]. Summary by Sections Supply and Demand Outlook - The paper industry is projected to have a loose balance in supply and demand in 2025, with limited new capacity for cultural paper but significant new capacity for specialty paper and white card paper, raising concerns about oversupply [2][3]. - The report anticipates that the new capacity will gradually taper off by 2025, but some new capacity will still be introduced, preventing a significant upward trend in the market [3]. Price Trends - Global hardwood pulp prices are expected to fluctuate in 2025, with a potential upward trend in the second half of the year due to increased demand and limited supply from major projects [6][7]. - The report notes that the mining market is currently experiencing high inventory levels, with prices expected to fluctuate between 550 and 650 USD in the first half of 2025, potentially improving in the second half due to demand recovery [8]. Company-Specific Insights - Sun Paper's integrated model in Laos, which includes 60,000 hectares of forest land, significantly reduces costs and is expected to enhance profitability as self-supply rates increase [24][25][27]. - The market has underestimated Sun Paper's potential for cost savings and profitability growth due to its self-supply of wood chips, which is projected to save over 1 billion RMB annually by 2030 [28][30]. Competitive Landscape - Companies that successfully integrate the entire paper production chain, like Sun Paper, are expected to have a competitive edge in the increasingly scarce forest resource environment [12]. - The report identifies key companies to watch, including Sun Paper, Xianhe Co., Huawang Technology, and Jiu Long Paper, indicating a positive outlook for their performance [16].