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02689 ND PAPER
RTNominal up8.220 +0.090 (+1.107%)

21/11/2019 17:32

{I-bank focus}ND Paper (02689) sees net of Rmb250/t in 2020

[ET Net News Agency, 21 November 2019] Morgan Stanley cited Nine Dragons Paper's
(02689) management on Morgan's Asia Pacific Summit guiding that around 6-7mnt of new
capacity would be added to the market in 2019. The planned new capacity in 2020 is around
7mnt, while about 60-70% or 4-5mnt would actually commence production in 2020.
Meanwhile, industry demand has been shrinking and is expected to further fall in 2019,
mainly impacted by trade friction. Entering the winter season, the company has observed
demand picking up since October and the ASP rose by Rmb30-100/t.
As the import quota continues to decrease and is expected to drop to zero in 2021, the
company expects the percentage of domestic OCC (old corrugated containers) used would
increase to 75% in 2020 and further to 85% in 2021. The other 15% OCC supply would come
from imported OCC inventory and imported recycled pulp from the US and Malaysia.
Nine Dragons does not see a shortage in domestic OCC supply. Management indicated that
the overall OCC demand in China is 60mnt, among which 50mnt is supplied by the domestic
market. The OCC import quota in 2019 year-to-date is 11mnt, while Nine Dragons accounted
for >3mnt or 30%.
Management guided that net profit per ton in FY2020 would be Rmb250/t, much higher than
that of smaller players, which range from Rmb50/t to Rmb100/t. They believe a 30-35%
dividend payout would be reasonable and expect the dividend payout in FY2020 to remain in
that range.
Morgan maintained its "equal-weight" rating on Nine Dragons, with a target price of
HK$7. (KL)

Remark: Real time quote last updated: 17/01/2020 17:59
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