Investment Rating - The report maintains an "Outperform" rating for the light industry sector [3] Core Viewpoints - The report highlights a recovery in consumer expectations, particularly in the home furnishing sector, with a potential turning point in the fundamentals [2] - It emphasizes the benefits of policy support and high-growth segments, recommending companies with strong product upgrades and e-commerce channels [2] - The report suggests focusing on leading companies in the lens industry that possess core R&D capabilities and strong brand development [2] Summary by Sections Home Furnishing - The report notes a recovery in the home furnishing sector driven by increased transactions in the second-hand housing market and improved consumer confidence, predicting better performance during the 315 promotional event compared to last year [8] - Key companies to watch include custom furniture leaders such as Oppein Home, Sophia, and Zhijia Home, as well as soft furniture leaders like Mousse and Kuka [8] Paper and Packaging - As of March 14, 2025, prices for various paper products remained stable, with double glue paper at 5450 CNY/ton, copper plate paper at 5820 CNY/ton, and box board paper at 3639.2 CNY/ton, which saw a decrease of 47.2 CNY/ton [8] - The report recommends companies like Sun Paper and Huawang Technology, which are expected to benefit from improved industry dynamics [8] Light Industry Consumption - The report mentions Meta's collaboration with Ray-Ban to launch limited edition AI glasses, which could drive demand for smart eyewear [8] - It also highlights the recovery of domestic consumption, suggesting a focus on cultural and creative leaders like Morning Glory and oral care leader Dengkang [8] Export Chain - The report discusses recent policy changes in Guangdong aimed at supporting cross-border e-commerce, which could enhance profitability for companies in this sector [8] - Companies to watch include Zhejiang Natural and Hars, which are expected to benefit from these developments [8] New Tobacco Products - The report notes trends in electronic cigarette regulation in the U.S., suggesting that compliance and harm reduction will be key focuses [8] - It recommends companies like Smoore International, which have strong partnerships and product advantages in the new tobacco sector [8] Textile and Apparel - The textile and apparel sector has shown strong performance, with companies like Hailan Home and Anta benefiting from supportive policies [8] - The report highlights the growth of the outdoor economy, recommending companies like Zhejiang Natural and Mugaodi [8]

Financial Data and Key Metrics Changes - Net sales for Q3 2023 were $5.1 billion, a decrease of 7.2% year over year [21] - Consolidated adjusted EBITDA was $802 million, down 20.2% year over year, with an adjusted EBITDA margin of 15.7%, a decline of 250 basis points [21] - Adjusted EPS was $0.89, reflecting strong execution despite challenging comparisons with the prior year [6] Business Line Data and Key Metrics Changes - **Corrugated Packaging**: Sales were $2.5 billion, an increase of 7.7% year over year, driven by the Mexico acquisition and strong price and mix [23] - **Consumer Packaging**: Segment sales were $1.3 billion, a decline of 1.5% year over year, with adjusted EBITDA margin at 18.4%, a decrease of 10 basis points [26] - **Global Paper**: Sales decreased by 33.8% year over year to $1.1 billion, with adjusted EBITDA declining 55.6% [29] Market Data and Key Metrics Changes - North American shipments per day were stable sequentially, with mid-single-digit improvement noted in July [6] - Consumer Packaging market volumes were down due to inventory reductions and inflation impacting demand [6] Company Strategy and Development Direction - The company is focused on cost savings, targeting over $1 billion in savings by the end of fiscal 2025, with $450 million in run rate savings expected by the end of fiscal 2023 [9][10] - Strategic mill closures are aimed at improving overall profitability and reallocating capital to higher return projects [12][13] - The company is investing in sustainable packaging solutions and expanding its machinery business to drive growth [16][19] Management's Comments on Operating Environment and Future Outlook - Management expects improvement in the first half of fiscal 2024 due to inventory rebalancing and moderating inflation [7][28] - Long-term fundamentals in the Consumer Packaging business remain healthy, with strong customer relationships and growing end markets [7] - The company anticipates a gradual recovery in volumes and improved conditions in fiscal 2024 [28][30] Other Important Information - The company plans to incur $345 million in restructuring charges related to mill closures, with a significant portion being non-cash [12] - The Longview box plant is expected to start operations in November, delivering $25 million in annual benefits once fully operational [15] Q&A Session Summary Question: Can you discuss the cadence of shipments during the quarter? - Management noted that the corrugated business was stable, with order rates up mid-single digits in July and strong backlogs [41][42] Question: What gives confidence in improvement for the consumer packaging segment? - Management highlighted consistent feedback from large customers indicating a shift to the right inventory levels and expectations for growth in 2024 [46] Question: Can you elaborate on the mill closures and their impact on EBITDA? - All closed mills were not generating positive EBITDA, and reallocating production is expected to improve overall profitability [52] Question: What is the progress on enterprise sales and machinery installations? - Enterprise sales reached over $9 billion, with strong momentum and a backlog of over 5,300 machines installed worldwide [61] Question: How should we think about the Tacoma mill closure and its earnings impact? - The Tacoma mill closure is expected to have a positive long-term impact on profitability, with cash costs associated with the closure estimated at around $345 million [94]