SUN PAPER(SZ:002078) EBSCN·2025-08-28 11:02Investment Rating - The report maintains a "Buy" rating for the company [1]. Core Views - The company's Q2 gross margin improved sequentially, leading to a quarterly profit that exceeded expectations [1]. - The company reported a revenue of 19.11 billion yuan for the first half of 2025, a year-on-year decrease of 6.9%, and a net profit attributable to shareholders of 1.78 billion yuan, a year-on-year increase of 1.3% [5]. - The report highlights that the decline in revenue was primarily due to falling paper prices, particularly in the pulp and paper business [6][8]. - The company is expected to benefit from the ongoing expansion of its production capacity across its three major bases, which will enhance its operational efficiency and product structure [9][10]. Summary by Sections Financial Performance - In Q2 2025, the company achieved a gross margin of 17.3%, a year-on-year increase of 0.1 percentage points and a sequential increase of 1.5 percentage points [8]. - The first half of 2025 saw a gross margin of 16.5%, down 1.1 percentage points year-on-year [7]. - The company’s revenue forecast for 2025-2027 has been adjusted downwards to 40.2 billion, 45.9 billion, and 53.9 billion yuan, respectively, reflecting a decrease of 10% across the board [10]. Revenue Breakdown - For the first half of 2025, the revenue from various paper products was as follows: double glue paper (4.2 billion yuan, -14.8% YoY), copper plate paper (2.02 billion yuan, -4.9% YoY), and life paper (1.29 billion yuan, +24.0% YoY) [6]. - The revenue from the pulp business was also affected, with chemical pulp revenue down 20.3% YoY [6]. Cost and Margin Analysis - The report indicates that the decline in gross margin for the paper business was mainly due to a shift in product mix and falling paper prices, which outpaced the decrease in raw material costs [8]. - The company’s operating expense ratio for the first half of 2025 was 5.4%, a decrease of 1.5 percentage points year-on-year [8]. Future Outlook - The company is set to launch several production lines in its Guangxi base in the second half of the year, which is expected to enhance its production capacity and operational synergy [9]. - The long-term performance outlook remains positive due to the ongoing expansion and integration of its supply chain [10].