Group 1 - The core viewpoint of the report is that due to the unexpected production and profit margins from self-produced pulp, the company has raised its net profit estimates for FY26-27 by 32% and 39% to 3.6 billion and 4 billion respectively, maintaining an outperform rating and increasing the target price by 29% to HKD 9, which implies a 21% upside potential [1] Group 2 - The company's net profit for 1HFY26 exceeded both the firm's and market expectations, with a forecasted profit of 2.15-2.25 billion, and after deducting perpetual bond interest, the profit is expected to be 1.95-2.05 billion, representing a year-on-year increase of 315%-337% [2] Group 3 - The boxboard and corrugated paper market is experiencing a stable recovery, with significant price increases expected in the second half of 2025 due to rising waste paper prices and the traditional peak season, leading to an anticipated stable recovery in profit margins [3] Group 4 - The company disclosed a pulp production target of 3 million tons for FY25, with expectations of over 2 million tons in 1HFY26, which is a key driver for the unexpected performance; the company’s self-produced pulp self-sufficiency rate is close to 100%, leading to higher profit margins compared to peers [4] Group 5 - The company is expected to see a recovery in financial quality for FY26, with remaining capital expenditures of approximately 11 billion, indicating a conclusion to the current capital expenditure cycle; improvements in profit and cash flow are anticipated to enhance the quality of FY26 financial reports [5]

Core Viewpoint - CICC has raised the net profit estimates for Nine Dragons Paper (02689) for FY26-27 by 32% and 39% to 3.6 billion and 4.0 billion HKD respectively, due to higher-than-expected self-produced pulp output and profit per ton [1] Group 1: Financial Performance - The company's net profit for 1HFY26 is expected to be between 2.15 billion and 2.25 billion HKD, with a core profit of 1.95 billion to 2.05 billion HKD, representing a year-on-year increase of 315%-337% [2] - The company is projected to achieve sales of approximately 12 million tons, with a net profit per ton of around 160 HKD, driven by lower self-produced pulp costs and higher output [2] Group 2: Market Trends - The market for corrugated paper is recovering steadily, with significant price increases expected in the second half of 2025 due to rising waste paper prices and the traditional peak season [3] - The company is positioned as the largest player in the corrugated paper market in China, holding about 25% market share, which enhances its earnings potential as the sector recovers [3] Group 3: Production Insights - The company plans to produce 3 million tons of pulp in FY25, with expectations of over 2 million tons in 1HFY26, which is a key driver for the anticipated strong performance [4] - The company’s self-produced pulp supply rate is nearly 100%, allowing it to achieve excess profits compared to peers, with expected average net profit per ton for white paper exceeding 300 HKD [4] Group 4: Financial Quality Outlook - The company is nearing the completion of its capital expenditure cycle, with planned spending of around 11 billion HKD for FY26, which is lower than previous years [5] - The company’s financial quality is expected to improve significantly in FY26, supported by enhanced profits and cash flow [5]

Group 1: Report Industry Investment Rating - No relevant content Group 2: Core View of the Report - The paper pulp futures are expected to be strong in the short - term, but the fluctuations may be large due to the positive factors on the supply side and the tight delivery resources for near - month contracts [6] Group 3: Summary by Related Catalogs Price Data - **Futures Prices (yuan/ton)**: On December 3, 2025, SP2601 was 5458 with a daily increase of 2.44% and a weekly increase of 4.80%; SP2512 was 4772 with a daily increase of 1.23% and a weekly increase of 1.02%; SP2605 was 5506 with a daily increase of 2.61% and a weekly increase of 4.68% [6] - **Spot Prices (yuan/ton)**: On December 3, 2025, the price of coniferous pulp Silver Star was 5450 (unchanged daily, up 0.93% weekly), Russian Needle was 5250 (unchanged daily and weekly), and broad - leaf pulp Goldfish was 4500 (up 2.27% daily and weekly) [6] - **Outer - Disk Quotes (dollars/ton)**: In December 2025, the price of Chilean Silver Star was 680 (unchanged monthly), Brazilian Goldfish was 540 (up 1.89% monthly), and Chilean Venus was 590 (unchanged monthly) [6] - **Import Costs (yuan/ton)**: In December 2025, the import cost of Chilean Silver Star was 5559 (unchanged monthly), Brazilian Goldfish was 4425 (up 1.87% monthly), and Chilean Venus was 4830 (unchanged monthly) [6] Fundamental Data - **Import Volume (10,000 tons)**: In October 2025, the import volume of coniferous pulp was 69.1 (unchanged from September), and that of broad - leaf pulp was 131.8 (down 2.80% from September) [6] - **Domestic Production (10,000 tons)**: For broad - leaf pulp in November 2025, the production was 25.2 on November 27; for chemimechanical pulp, it was 23.7 on November 27 [6] - **Inventory**: As of November 27, 2025, the paper pulp port inventory was 217.2 (down 0.1 from the previous period, a 0.05% decrease), and the futures delivery warehouse inventory was 21.1 [6] - **Demand (10,000 tons)**: In November 2025, the production of double - offset paper was 20.80 on November 27, copper - plate paper was 8.50, tissue paper was 28.49, and white cardboard was 38.40 [6] Valuation Data - **Basis**: On December 3, 2025, the Russian Needle basis was 478 with a quantile level of 0.949, and the Silver Star basis was 678 with a quantile level of 0.896 [6] - **Import Profit**: On December 3, 2025, the import profit of coniferous pulp Silver Star was - 109 with a quantile level of 0.45, and that of broad - leaf pulp Goldfish was 75 with a quantile level of 0.726 [6] Supply, Demand, and Inventory Analysis - **Supply**: Chile's Arauco Company's November quotes were 550 dollars/ton for broad - leaf pulp Star and 620 dollars/ton for natural pulp Venus. Canadian pulp mills have reduced production [6] - **Demand**: Recently, wood - pulp paper producers have issued price - increase letters. Only the implementation of white cardboard price increases is good, and double - offset paper has issued price - increase letters again [6] - **Inventory**: As of November 27, 2025, the inventory in China's main paper pulp ports was 217.2 tons, showing a slight de - stocking trend [6]

Group 1: Report Industry Investment Rating - No relevant content provided Group 2: Core Viewpoints of the Report - The fundamentals of pulp have not improved significantly, but there is a potential shortage of delivery resources for the 26-year Russian needle pulp. The futures price may be priced based on Russian needle pulp and high-quality softwood pulp. The current futures price is close to the import cost of the delivery product, and the room for further increase is limited. It is recommended to close the 12 - 1 reverse spread position [10] Group 3: Summary Based on Related Catalogs 1. Pulp Price Data - **Futures Prices**: On November 16, 2025, SP2601 was 5480, down 0.98% day - on - day and up 1.59% week - on - week; SP2511 was 4900, down 0.12% day - on - day and up 0.41% week - on - week; SP2605 was 5462, down 0.73% day - on - day and up 1.19% week - on - week [5] - **Spot Prices**: On November 16, 2025, the spot price of softwood pulp Silver Star was 5550, unchanged day - on - day and up 0.91% week - on - week; that of Russian Needle was 5400, unchanged day - on - day and up 5.88% week - on - week; that of hardwood pulp Goldfish was 4400, unchanged day - on - day and up 3.53% week - on - week [5] - **Foreign Quotes**: The quotes of Chilean Silver Star and Brazilian Goldfish were 680 and 530 dollars respectively, down 2.86% and up 3.92% month - on - month; that of Chilean Venus was 590 dollars, unchanged month - on - month [5] - **Import Costs**: The import costs of Chilean Silver Star and Brazilian Goldfish were 5559 and 4344 respectively, down 2.83% and up 3.87% month - on - month; that of Chilean Venus was 4830, unchanged month - on - month [5] 2. Pulp Fundamental Data - **Supply**: In September 2025, the import volume of knitting pulp was 69.1 tons, up 12.54% month - on - month; that of hardwood pulp was 135.6 tons, up 7.79% month - on - month. The domestic production of hardwood pulp and chemimechanical pulp fluctuated in different periods. The pulp shipment volume in China in September 2025 was 187 tons, up 13.50% [5] - **Inventory**: As of November 13, 2025, the pulp port inventory was 211 tons, up 6.1% from the previous period; the futures delivery warehouse inventory was 22.2 tons [5] - **Demand**: The production of finished paper such as offset paper, coated paper, tissue paper, and white cardboard also fluctuated in different periods [5] 3. Pulp Valuation Data - **Basis**: On November 16, 2025, the basis of Russian Needle was 500 with a quantile level of 0.951; that of Silver Star was 650 with a quantile level of 0.88 [5] - **Import Profit**: On November 16, 2025, the import profit of softwood pulp Silver Star was - 9 with a quantile level of 0.594; that of hardwood pulp Goldfish was 56 with a quantile level of 0.704 [5]

Group 1: Report Industry Investment Rating - No information provided Group 2: Core Viewpoints of the Report - The pulp fundamentals have not significantly improved, but there is a potential shortage of delivery resources for the 2026 needle pulp contract, and the futures price may be priced according to the price of Russian needle pulp and high - quality softwood pulp. The 12 - 1 reverse spread strategy is maintained [11]. Group 3: Summary by Relevant Catalogs 1. Price Data - **Futures Prices**: On October 30, 2025, SP2601 was 5224, down 0.34% day - on - day and 0.50% week - on - week; SP2511 was 4846, up 0.21% day - on - day and down 0.16% week - on - week; SP2605 was 5264, down 0.23% day - on - day and 0.49% week - on - week [6]. - **Spot Prices**: On the same day, the price of softwood pulp Silver Star was 5500, unchanged day - on - day and week - on - week; Russian needle pulp was 5100, unchanged; and hardwood pulp Goldfish was 4250, unchanged [6]. - **Foreign Quotes**: The quote of Chilean Silver Star was 680 dollars, down 2.86% month - on - month; the quote of a certain product type was 530 dollars, up 3.92% month - on - month; and the quote of Chilean Venus was 590 dollars, unchanged month - on - month [6]. - **Import Costs**: The import cost of Brazilian Goldfish was 4344, up 3.87% month - on - month; the import cost of Chilean Silver Star was 5559, down 2.83% month - on - month; and the import cost of Chilean Venus was 4830, unchanged month - on - month [6]. 2. Fundamental Data - **Supply**: In September 2025, the import volume of softwood pulp was 69.1 tons, up 12.54% month - on - month, and the import volume of hardwood pulp was 135.6 tons, up 7.79% month - on - month. The pulp shipment volume to China in August 2025 was 162 tons, up 4.50% [6]. - **Inventory**: As of October 30, 2025, the pulp port inventory was 206.1 tons, up 0.3% month - on - month, showing a narrow - range inventory accumulation trend [11]. - **Demand**: The current demand for paper products is basically stable, and paper prices have not rebounded significantly. The positive impact of the "Golden September and Silver October" on the pulp demand side has not been reflected [11]. 3. Valuation Data - **Basis**: On October 30, 2025, the Russian needle pulp basis was 254, with a quantile level of 0.912; the Silver Star basis was 654, with a quantile level of 0.881 [6]. - **Import Profit**: The import profit of softwood pulp Silver Star was - 59, with a quantile level of 0.512; the import profit of hardwood pulp Goldfish was - 94, with a quantile level of 0.556 [6].

Group 1: Report Industry Investment Rating - Not mentioned in the provided content Group 2: Core View of the Report - The sentiment of macro commodities has turned positive recently, and prices are expected to rise in the short term [2] Group 3: Summary According to Relevant Catalogs Futures and Spot Prices - On August 6, 2025, the price of SP2601 was 5428, with a daily increase of 0.44% and a decrease of 1.34% compared to the Japanese version; SP2605 was 5404, with a daily decrease of 0.30% and a decrease of 1.22% compared to the Japanese version; SP2509 was 5170, with a daily increase of 0.19% and a decrease of 2.93% compared to the Japanese version [1] - The spot price of coniferous pulp Silver Star was 5850, unchanged from the previous day and down 1.18% compared to the Japanese version; Russian Needle was 5180, unchanged and down 4.43%; Broadleaf pulp Goldfish was 4080, unchanged and down 1.69% [1] Outer - disk Quotes and Import Costs - The outer - disk quote of Chilean Silver Star was 720 dollars, down 2.70% from the previous period; Chilean Star was 500 dollars, down 10.71%; Chilean Venus was 620 dollars, unchanged [1] - The import cost of Chilean Silver Star was 5884, down 2.68% from the previous period; Chilean Star was 4101, down 10.60%; Chilean Venus was 5073, unchanged [1] Supply - In June 2025, the import volume of coniferous pulp was 67.8 tons, down 6.09% from May; broadleaf pulp was 143.5 tons, up 10.98% [1] - The shipment volume of W20 to China in May 2025 was 140, up 3.30% from April [1] - The domestic production of broadleaf pulp and chemimechanical pulp fluctuated in July 2025 [1] Inventory - As of July 31, 2025, the inventory of Chinese pulp mainstream ports was 210.5 tons, a decrease of 3.8 tons from the previous period, a 1.8% decline [1] - The inventory of the futures delivery warehouse also showed certain changes during the period [1] Demand - The production of major finished papers decreased slightly this week, and the prices of finished papers remained low, providing weak support for pulp [1] Valuation - On August 6, 2025, the Russian Needle basis was 10, with a quantile level of 0.72; Silver Star basis was 680, with a quantile level of 0.904 [1] - The import profit of coniferous pulp Silver Star was - 34, with a quantile level of 0.545; broadleaf pulp Goldfish was - 21, with a quantile level of 0.613 [1]