Core Viewpoint - The company forecasts FY25 net profit attributable to shareholders to be between 1.7 billion to 1.9 billion yuan, exceeding both market expectations and previous estimates due to better-than-expected cost control in self-produced pulp and a decline in coal prices [1] Group 1: Financial Performance - The company expects FY25 earnings to be between 2.1 billion to 2.3 billion yuan, representing a year-on-year increase of 165% to 190%, with net profit attributable to shareholders increasing by 126% to 153% [1] - The company estimates FY25 paper production volume to be over 21 million tons, a year-on-year increase of 10% [1] - The company has a projected capital expenditure of over 13 billion yuan for FY25, with a potential decline in FY26 capital expenditure but still at a relatively high level [2] Group 2: Production and Capacity Expansion - The company is focusing on expanding its production capacity in Guangxi and Hubei, with plans to produce 1.2 million tons of white cardboard, 600,000 tons of cultural paper, 1.75 million tons of chemical pulp, and 600,000 tons of mechanical pulp by FY25 [1] - By the end of FY25, the company's total paper and pulp production capacity is expected to exceed 30 million tons, with a compound annual growth rate (CAGR) of over 8% for paper and over 30% for pulp from 2021 to 2025 [1] Group 3: Cost Management and Market Conditions - The company's performance is primarily driven by a significant reduction in self-produced pulp costs, particularly at its integrated pulp and paper base in Beihai, Guangxi [2] - The average prices for various paper products have shown a downward trend, with boxboard, double glue paper, and white cardboard prices decreasing by 4%, 9%, and 7% respectively in the first half of 2025 [2] - The company needs to monitor changes in self-produced pulp costs and the pricing performance of certain paper products during peak seasons [2] Group 4: Earnings Forecast and Valuation - The company has raised its earnings forecast for FY25 and FY26 by 25% and 49% respectively, with projected earnings of 1.8 billion yuan and 2.5 billion yuan [3] - The target price has been increased by 33% to 6.0 HKD, corresponding to a price-to-book ratio of 0.5x for FY25, FY26, and FY27 [3]

Core Viewpoint - CICC has raised its earnings forecast for Nine Dragons Paper (02689) for FY25-26 by 25% and 49% to 1.8 billion and 2.5 billion HKD respectively, citing better-than-expected self-produced pulp cost advantages [1] Group 1: Earnings and Performance - The company expects FY25 earnings to be between 2.1 billion and 2.3 billion HKD, representing a year-on-year increase of 165% to 190%, with net profit attributable to shareholders projected at 1.7 billion to 1.9 billion HKD, up 126% to 153% [1] - CICC maintains an "outperform" rating for the industry and has raised the target price by 33% to 6.0 HKD, which implies an 11% upside potential [1] Group 2: Production and Capacity - For FY25, the company is estimated to produce 21 million tons of paper, a 10% increase year-on-year, with a focus on expanding the pulp paper category and enhancing raw material layout [2] - The company plans to invest in new production bases in Guangxi and Hubei, with a total production capacity expected to exceed 30 million tons by the end of FY25 [2] Group 3: Cost Management - The core reason for the better-than-expected performance is attributed to a significant reduction in costs, particularly in self-produced pulp, and a notable decline in coal prices [3] - The average prices for various paper types have decreased, with boxboard paper, double glue paper, and white card paper down by 4%, 9%, and 7% respectively [3] Group 4: Capital Expenditure and Debt - The company is entering a new phase of high capital expenditure, with FY25 capital spending expected to exceed 13 billion HKD [4] - There is a need to monitor the company's debt levels closely, as capital expenditures may remain relatively high in FY26 [4]

Group 1: Core Insights - The report from Guotai Junan indicates a slowdown in the decline of pulp and paper prices in July, with expectations for a rebound in pulp prices and stabilization in white paper prices, while black paper continues to rise [1] - The cultural paper segment faces ongoing supply-demand imbalances, with rising waste paper prices providing some support for corrugated paper prices [1] Group 2: Cultural Paper - As of July 29, the average market price for 70g wood pulp high white double glue paper was 5,094 RMB/ton, a decrease of 57 RMB/ton (1.11%) month-on-month and a drop of 525 RMB/ton (9.34%) year-on-year [2] - Factors affecting the market include limited adjustments in paper factory pricing, moderate inventory pressure due to concentrated orders, and weak downstream demand leading to cautious purchasing by distributors [2] Group 3: White Cardboard - As of July 29, the average market price for 250-400g flat white cardboard was 4,036 RMB/ton, down 1.25% from June and 9.02% year-on-year [3] - The market is characterized by oversupply, weak terminal demand, and cautious purchasing behavior from customers, with small paper mills offering limited-time promotions [3] Group 4: Corrugated Paper - As of July 29, the average market price for corrugated paper was 3,449 RMB/ton, a decrease of 52 RMB/ton (1.49%) from June and a year-on-year decline of 5.03% [4] - The market saw mixed price movements in early July, but a price increase from large paper mills in the latter half of the month led to a slight uptick in market prices [4] Group 5: Pulp Market - The main prices for imported broadleaf pulp are around 490 USD/ton, with some sources maintaining prices at 500 USD/ton, while imported softwood pulp prices remain stable [5] - The pulp market is characterized by weak demand from the paper industry, leading to a decline in pulp prices, despite some upward pressure from market sentiment and policy expectations [5]

Investment Rating - The report rates the paper industry as "Overweight" [6] Core Views - In July, the decline in pulp and paper prices slowed, with expectations for a rebound in pulp prices and stabilization in white paper prices, while black paper prices continued to rise [2] Summary by Sections Cultural Paper - Prices for cultural paper have been declining, with the average market price for 70g high white double glue paper at 5094 CNY/ton, down 1.11% month-on-month and 9.34% year-on-year [10][23] - Supply and demand remain imbalanced, with production recovering but overall demand still weak [13][10] - Profitability is stable as both prices and costs are declining, with the average theoretical gross margin at 1.59% [23] White Cardboard - Prices continue to decline due to weak seasonal demand, with the average market price for 250-400g white cardboard at 4036 CNY/ton, down 1.25% month-on-month and 9.02% year-on-year [24] - The supply-demand gap is expected to widen, putting further pressure on prices [27] - Profit margins are decreasing as the price drop exceeds the cost drop, with gross margins declining [39] Boxboard - Prices for boxboard have shown mixed trends, with the average price at 3449 CNY/ton, down 1.49% month-on-month [42] - Demand is expected to recover in August, alleviating some supply pressure [46] - Profitability remains low as the price drop is greater than the cost drop [11] Waste Paper - The supply of waste paper is tight, leading to a gradual increase in prices [12] Wood Chips - Import volumes have increased month-on-month, with overall demand stabilizing [14] Wood Pulp - External prices are stabilizing, but the supply-demand imbalance persists, with average prices for imported hardwood pulp at 490 USD/ton [15][6]

Core Viewpoint - The paper industry is facing persistent supply-demand contradictions, with paper prices and profitability at historically low levels, particularly for double glue paper and white card paper, which are currently experiencing losses in gross profit margins [1][3]. Group 1: Paper Price Trends - As of the first week of August, prices for double glue paper and white card paper have reached new lows, with gross profit margins falling below the 20th percentile of the historical ten-year range [1]. - The leading box and corrugated paper producers have implemented multiple price increases, with cumulative price hikes for kraft linerboard ranging from 30 to 140 CNY per ton and for corrugated paper from 60 to 140 CNY per ton since late July [1]. - The price increases have accelerated due to rising costs, particularly the steady increase in domestic waste paper prices, prompting smaller manufacturers to follow suit [1]. Group 2: Profitability and Cost Dynamics - The profitability of corrugated paper is beginning to recover as its price increases are catching up with rising costs, although overall profitability remains constrained for high-end box paper due to limited price increases [1]. - The first quarter of 2025 saw peak profitability for box and corrugated paper, but profitability declined in July as paper prices did not keep pace with cost increases [1]. Group 3: Market Outlook for Pulp - The U.S. has exempted Brazilian pulp from a 40% tariff, which has positively influenced market expectations for pulp prices [2]. - Major pulp producers like Bracell and Suzano have announced production cuts, which are expected to support price increases in the pulp market [2]. - Domestic and international pulp manufacturers have raised prices, with spot prices for broadleaf pulp increasing by 125-150 CNY per ton since early July [2]. Group 4: Future Expectations - The paper price increases are expected to continue, driven by seasonal demand and cost pressures, with the potential for improved profitability as the price-cost gap widens [3]. - The production of double glue paper has decreased by 11.9% year-on-year from January to July 2025, indicating a tightening supply in the market [3]. - If pulp prices rise in the future, leading paper manufacturers are likely to pass on these costs, encouraging smaller manufacturers to follow suit during peak demand seasons [3].

Group 1 - The core viewpoint of the article indicates that the prices of pulp and paper are experiencing a downward trend, with pulp prices expected to remain low and paper prices approaching a weak seasonal period [1][2][3][4] Group 2 - Cultural paper prices and costs are both declining, with a marginal improvement in supply and demand expected. As of May 28, the market average price for 70g high white double glue paper is 5204 yuan/ton, a decrease of 2.84% month-on-month. Factors include weak orders from paper mills, general inventory pressure, and limited support from downstream demand [1] - Whiteboard prices initially fell before slightly rebounding, with an overall downward trend in supply and demand. As of May 28, the market average price for 250-400g flat white cardboard is 4075 yuan/ton, down 3.28% month-on-month. The market faced weak orders and a supply surplus, although a slight recovery was noted mid-month due to improved macro sentiment [2] - Boxboard prices and profitability continue to decline as the off-season approaches, with the average market price for corrugated paper at 3511 yuan/ton, down 0.90% month-on-month. Initial price drops were followed by a slight increase due to tariff adjustments, but overall demand remains weak [3] - Pulp prices are declining due to limited demand improvement. External prices for needle and hardwood pulp have been adjusted downwards, with domestic hardwood pulp prices also under pressure. Downstream raw paper companies are maintaining low inventory levels, limiting upward price momentum in the pulp market [4]