Citigroup has released a research report maintaining a "Neutral" rating on Nine Dragons Paper with a target price of HK$8.8, stating it will review its forecasts following the company's results briefing scheduled for September 24. The company's fiscal year results, ending June 30, broadly aligned with expectations, with net profit attributable to shareholders reaching RMB 3.581 billion, a 102.6% year-on-year increase that came in approximately 2% higher than the midpoint of the August profit alert range of RMB 3.5 billion.

Revenue climbed 18.6% year-on-year to RMB 75 billion, while sales volume increased 14% to 24.5 million tonnes, with average selling prices rising 4% year-on-year. The bank noted that the company recorded property, plant, and equipment impairments of RMB 277 million and foreign exchange losses of RMB 184 million, suggesting underlying net profit should be closer to RMB 4 billion.

However, net profit per tonne in the second half of the fiscal year declined 13% year-on-year to RMB 174, marking the first contraction after three consecutive interim periods of flat profitability. This reflects weak consumer demand and indicates that the robust margin recovery driven by vertically integrated pulp operations has largely run its course. Citigroup expects margins to decline further on a sequential basis in the first half of the current fiscal year ending December 31, as waste paper cost inflation in the first fiscal quarter ending September 30 appears to be outpacing paper price inflation.