CICC: Maintains "Outperform" rating on ND PAPER (02689) with a target price of 12 Hong Kong dollars.

CICC released a research report stating that it maintains the "outperform industry" rating on ND PAPER (02689), with unchanged profit and target price. The current stock price corresponds to a FY26-27 P/B of 0.5x. The target price is HK $12, corresponding to FY26-27 P/B of 0.9x and 0.8x, implying a 64% upside potential. Key points from CICC: Company recent developments On June 15, 2026, the company simultaneously released two announcements: 1) The company initiated a cash repurchase of $400 million of perpetual bonds with a 14% interest rate, which will be immediately cancelled after repurchase. 2) The company signed loan agreements with several banks, providing a three-year loan of RMB 2 billion. This repurchase is in line with the company's previous public commitments. The early redemption of the perpetual bonds demonstrates the management's confidence in the development. The $400 million perpetual bonds were issued in June 2024 for general corporate purposes; there is no fixed redemption date, and the fixed annual interest rate for the first three years (until June 2027) is 14%, corresponding to an annual interest expense of about RMB 400 million; the management and related parties collectively hold 81% of the perpetual bonds. According to the announcement, this repurchase offers an early bird premium of 7%, and the management voluntarily forfeits the premium, committing to pay a standard repurchase price after the early bird period, resulting in a total concession of approximately $23 million; in terms of funding, the company plans to complete the repurchase through the $2 billion syndicated loan and its own funds. Based on the above calculations, the annual interest expense of the company can decrease by about RMB 300 million after the complete repurchase of all perpetual bonds; the company believes that this repurchase initiative aligns with the early redemption commitment made in previous public performance conferences, and the management's voluntary waiver of the premium demonstrates long-term confidence in the company. The recent atmosphere of price increases in the container board and corrugated paper market, black paper profitability may recover better than other paper varieties The bank observed that the prices of container board and corrugated paper have steadily risen since April, with increases of 180 to 320 yuan per ton, reaching 3,735 to 3,030 yuan / ton. The bank believes that the core drivers for this round of price increases are rising waste paper costs, paper mills issuing maintenance and price increase letters, and demand recovery driven by export orders. Looking ahead, in the context of better price execution by leading paper mills, catalyzed by seasonal demand, and quicker completion of new supply in the sector, the bank believes that there is still room for upside in black paper prices, with black paper profitability recovering better than other paper varieties. Risk factors: Demand below expectations; significant fluctuations in pulp prices; capital expenditure exceeding expectations; high debt ratio.