GTHT Securities has issued a research report reiterating its 'Buy' rating on ND PAPER (02689). The firm forecasts the company's earnings per share (EPS) for fiscal years 2026 through 2028 to be 0.76, 1.07, and 1.23 yuan, respectively.

Factoring in the sustained positive momentum in the containerboard and corrugated paper sector, coupled with the company's proactive efforts to enhance its raw material self-sufficiency, the report applies a price-to-earnings (P/E) multiple of 12 times for FY2026, leading to a target price of HK$10.51.

Key Points from the Analysis

GTHT Securities highlights several key factors supporting its view. The simultaneous price hike initiated by the company across its ten major production bases in late June has spurred industry-wide increases, with some paperboard manufacturers following suit. This marks multiple rounds of price increases since mid-April.

Price Momentum Expected to Persist

The upward trend in containerboard and corrugated paper prices is anticipated to continue. Prices for these products rose in the first week of July, with the increases sufficient to cover cost pressures. The current round of price hikes is scheduled to last through mid-July, with downstream players also raising prices, signaling strong coordinated pricing action. Supported by raw material costs, the report concludes the upward trend for packaging paper is likely to endure.

Strong Profit Protection Drive and Margin Improvement

There is a strong industry-wide desire to protect profit margins. Downstream paperboard plants are willing to purchase amid rising prices, accelerating the pass-through of costs. Paper mill inventories remain low, while domestic wastepaper prices continue to climb due to tight supply. Under these coordinated price increases, marginal profit per ton has shown improvement, as evidenced by increased gross profit per ton for containerboard and corrugated paper in early July.

Sustained High Demand and Integrated Strategy

Looking ahead to the second half of 2026, robust demand for packaging paper is expected to continue during the peak season in August, with factors like AI driving export demand. Industry price hikes are accelerating their extension through the vertical supply chain, which could amplify price increases and further boost profit per ton. From a medium- to long-term perspective, the overall industry supply-demand dynamic continues to improve. ND PAPER is actively advancing its pulp-paper integration strategy, with 2.5 million tons of pulp capacity slated for commissioning by the end of 2026 and into 2027. This move towards diversified raw material sourcing, high pulp self-sufficiency, and the company's strong market position are expected to build a lasting cost advantage.

The report also notes potential risks, including a slower-than-expected recovery in downstream demand and significant surges in raw material prices.