According to a report published by Yamato, Rikbun Paper (2314.HK) reported a profit warning. Last year's profit was expected to drop 60% year-on-year, mainly due to revenue and gross margin recording a year-on-year decline. Although downstream demand is expected to gradually improve this year, the bank believes that the market has fully reflected the potential rebound. Since the Group's stock price has rebounded by more than 40% from the low level in November last year, the current valuation is equivalent to 7 times this year's price-earnings ratio, which is the average for the past five years.

The bank said it would downgrade the investment rating of Lee & Man Paper from “outperform the market” to “hold”, lower the target price from HK$3.5 to HK$3.3, and lower its profit forecast for 2022 to 2024 by 17% to 30%, reflecting lower sales assumptions. The bank believes that the Group may face several challenges this year, which may affect the recovery, including worsening supply and demand dynamics and competition from imported wrapping paper.