GTHT Securities has released a research report maintaining a "Buy" rating on ND PAPER (02689). Taking into account the company's recent operational performance, the firm forecasts an EPS of 0.85/0.94/1.03 yuan for FY2026-2028 (compared to the previous FY2026-2027 EPS forecast of 0.48/0.52 yuan). Referencing industry valuation benchmarks, a FY2026 PE multiple of 25x is applied, resulting in a target price of HK$23.1 (using an exchange rate of 1 HKD to 0.92 RMB). The key points from GTHT Securities' report are as follows.

The company's FY26 first-half operating performance is expected to show a profit of 1.95-2.05 billion yuan after excluding 200 million yuan attributable to perpetual capital securities, representing a year-on-year increase of 315.2%-336.5% and a quarter-on-quarter increase of 50.3%-58.0%. This significant profit growth is primarily attributed to increased product sales volume, higher selling prices, and a substantial improvement in gross profit due to lower raw material costs, with pulp being the main contributor to profits.

The incremental profit contribution mainly stems from the integrated pulp and paper production capacity at the Hubei and Beihai bases. In FY25 H1, the Beihai base commenced operations for 1.1 million tonnes of chemical pulp and 600,000 tonnes of chemi-mechanical pulp. New capacity additions in FY25 H2 and FY26 H1 include 650,000 tonnes of chemical pulp, 700,000 tonnes of chemi-mechanical pulp, and 1.2 million tonnes of white card paper in Hubei, plus 700,000 tonnes of cultural paper (pm56, pm55) in Guangxi. Capacity from newly commissioned projects at the Beihai base in FY24/25 is also gradually ramping up.

Looking ahead to FY26 H2, the report suggests that hardwood pulp prices may see further short-term increases and remain elevated. Prices and per-tonne profits for cultural and white card paper are currently at historically low levels, indicating potential for price pass-through, which would lead to the continued release of profits from the integrated pulp-paper operations. The report identifies the outstanding profitability of the integrated pulp and paper capacity as the primary factor that could exceed expectations. With additional pulp and paper capacity scheduled for commissioning and ramp-up in FY26 H2 and FY27, coupled with an improvement in profits for containerboard and corrugating medium paper, the stock remains a key recommendation. Potential risks include a slower-than-expected recovery in downstream demand and a significant rise in raw material prices.