Citi: Maintains "Neutral" rating on ND PAPER (02689) and target price of HK$8.8, expects margin pressure in the first half of FY2027.

Citi released a research report maintaining its "Neutral" rating on ND PAPER (02689) and a target price of HK$8.8, and will review its forecasts after the results briefing on September 24. The company's fiscal year results ended June this year were broadly in line with expectations, with net profit attributable to shareholders of RMB 3.581 billion, up 102.6% year-on-year, about 2% higher than the midpoint of the August profit alert of RMB 3.5 billion. Revenue rose 18.6% year-on-year to RMB 75 billion, sales volume rose 14% year-on-year to 24.5 million tonnes, and average selling price rose 4% year-on-year. The bank noted that the company recorded property, plant and equipment impairment of RMB 277 million and exchange losses of RMB 184 million, so underlying net profit should be close to RMB 4 billion. However, net profit per tonne in the second half of the fiscal year fell 13% year-on-year to RMB 174, the first contraction after three consecutive interim results with flat margins, reflecting weak consumption and indicating that the strong margin recovery from vertical pulp integration is largely complete. The bank expects margins to decline further half-on-half in the first half of the fiscal year ending December this year, as waste paper cost inflation appeared to lead paper price inflation in the first fiscal quarter ended September.