The Zhitong Finance App learned that CICC released a research report stating that while maintaining Nine Dragons Paper's (02689) “outperforming the industry” rating, the profit forecast for FY24-25 remains unchanged, with a target price of HK$4.9. The company announced 1HFY24 results: revenue of 30.6 billion yuan, -1.9% year-on-year; net profit changed from loss to profit of 292 million yuan year-on-year (at the center of the previous profit forecast), which is in line with the same period last year - 1,389 million yuan, in line with the bank's expectations.

According to the report, tariffs on some imported paper in China returned to zero in 2023. According to the General Administration of Customs, the import volume of box tile paper was 8.54 million tons, +2.9 million tons; under weak domestic demand and concentrated new supply, import tariffs were reduced to zero to highlight the cost advantage of imported paper; second, imported paper from Southeast Asia directly impacted the South China market. Price wars are not uncommon, and Dongguan in South China is the core factory area of Nine Dragons. Looking ahead to 2024, the bank judges that imported paper is still at an all-time high for the whole year, but the new impact is expected to abate, while rising shipping and external waste costs may further increase the cost of imported paper and cushion the impact on domestic paper prices.

The bank quoted the company's announcement that 3Q23YTD has launched 800,000 tons of kraft paper+200,000 tons of cultural paper in Beihai as scheduled, 300,000 tons of corrugated paper from Malaysia, and 100,000 tons of wood fiber from Vietnam, with a total paper+fiber production capacity exceeding 25.8 million tons; the company announced that it plans to slow 600,000 tons of chemical machine pulp+1.1 million tons of machine pulp production capacity in Beihai, and delay production by one quarter until 3Q24; it was originally scheduled to launch 1.2 million tons of tile paper in Hubei, and production was changed to 600,000 tons of cultural paper (2Q25 release). Unlike previous cycles, Nine Dragons dynamically adjusts launch pace and categories, focusing on products Diversified structure and industrial chain integration. Furthermore, coal prices were high in 2021-23, and leading energy costs of owning their own power plants were not superior. The industry's cost curve was flattened for a while. As coal prices fell, the cost advantage on the leading energy side gradually returned.