Haitong maintains "buy" rating on ND PAPER (02689), driving value reconstruction of pulp and paper integration

Guotai Haitong released a research report stating that it maintains a "buy" rating on ND PAPER (02689), considering the recent operating conditions of the company. It is expected that the company's EPS for FY2026-2028 will be 0.85/0.94/1.03 yuan (compared to the original EPS forecast of 0.48/0.52 yuan for FY2026-2027). Referring to the industry valuation level, the company is given a 25xPE for FY2026, with a target price of 23.1 Hong Kong dollars (exchange rate of 1 Hong Kong dollar to 0.92 RMB). Guotai Haitong's main points are as follows: FY26H1 Operating Conditions After excluding perpetual capital securities, ND PAPER is expected to have a profit of 19.5-20.5 billion yuan in FY26H1, a year-on-year increase of 315.2%-336.5% and a quarter-on-quarter increase of 50.3%-58.0%. The profit growth is mainly attributed to the increase in product sales volume and higher selling prices, as well as a significant increase in gross profit margin due to lower raw material costs, with the main profit contribution coming from pulp. Incremental profit contribution mainly comes from the integrated capacity of pulp and paper at Hubei and Beihai bases. FY25H1 saw the commissioning of 1.1 million tons of chemical pulp and 600,000 tons of mechanical pulp at the Beihai base. In FY25H2 and FY26H1, added capacity includes 650,000 tons of chemical pulp, 700,000 tons of mechanical pulp, and 1.2 million tons of white cardboard at Hubei, as well as 700,000 tons of cultural paper and cardboard at Guangxi (PM56, PM55). The new production capacity at the Beihai base in FY24/25 is gradually ramping up. FY26H2 Outlook Looking ahead to FY26H2, the bank believes that the short-term outlook for broadleaf pulp is expected to continue to rise and remain high, while prices and profitability of cultural and white cardboard are at historic lows, offering further upside potential. The integrated profit release of pulp and paper continues. The bank believes that strong profitability of integrated pulp and paper capacity is the main point of exceeding expectations, with further capacity commissioning and ramp-up in FY26H2 and FY27, along with improving profitability of boxboard corrugated paper. Risk factors Downstream demand recovery falls short of expectations, and raw material prices rise significantly.