Tianfeng Securities initiated coverage on ND PAPER (02689), assigning a "Buy" rating with a target price range of HK$6.6–8.0 per share. The firm forecasts net profits attributable to shareholders of RMB3.12 billion, RMB3.49 billion, and RMB3.84 billion for FY26–FY28, respectively, translating to P/E ratios of 8.6x, 7.7x, and 7.0x.

**Valuation and Growth Prospects** ND PAPER’s current P/E and P/B multiples are near historical lows. With steady progress in pulp-paper integration and an expected cyclical recovery, profitability is projected to improve. Factoring in the H-share discount relative to A-shares, Tianfeng values ND PAPER at 10x–12x FY26 P/E.

**Company Overview** Founded in 1995 and headquartered in Dongguan, Guangdong, ND PAPER listed on the Hong Kong Stock Exchange in 2006. It is now the world’s largest paper producer by capacity and a leader in integrated pulp-paper operations, specializing in eco-friendly packaging paper, cultural paper, and high-end wood pulp paper. Its annual production capacity exceeds 23 million tons, with three decades of expansion diversifying its upstream and downstream supply chain.

**Financial Performance** Driven by capacity expansion, revenue grew at a 7% CAGR over the past decade, reaching RMB63.24 billion in FY25 (+6.3% YoY). Improved industry supply-demand dynamics and cost optimization from pulp integration lifted FY25 net profit to RMB1.77 billion (+135% YoY).

**Sector Outlook: Corrugated Paper** - **Demand**: Corrugated paper consumption in China hit 35.82 million tons (boxboard) and 34.07 million tons (corrugating medium) in 2024, with 5-year CAGRs of 8.3% and 7.5%. E-commerce, logistics, and consumer goods sectors will sustain growth. - **Supply**: Post-2022 capacity expansions and policy shifts (e.g., wastepaper import bans) initially pressured prices. However, leading players’ scaled-back capex post-2025 and industry consolidation are expected to rebalance the market. - **Price Trends**: Seasonal demand and rising costs may support near-term prices. Mid-term, rational capacity additions and anti-dumping initiatives (e.g., Guangdong Paper Association’s July guidelines) could stabilize margins.

**ND PAPER’s Strategic Focus** - **Capacity**: By June 2025, ND PAPER’s annual paper and pulp capacity reached ~29 million tons, adding 5+ million tons of paper and 4.5+ million tons of pulp since FY22 (9% CAGR). - **Product Mix**: Premium products like high-grade kraft and whiteboard paper enhance margins, with per-ton costs declining notably in FY25. - **Pulp Integration**: By end-2025, ND PAPER aims for 700k tons of recycled pulp, 2+ million tons of wood fiber, and 5.4+ million tons of wood pulp capacity. Planned expansions in Chongqing, Tianjin, and Guangxi could boost self-sufficiency to 10.2 million tons by 2027, reducing reliance on wastepaper and stabilizing costs.