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中金:在温和复苏中前进 造纸行业盈利有望稳步修复

CICC: Moving forward amid a moderate recovery, paper industry profits are expected to recover steadily

Zhitong Finance ·  12/06/2023 08:03

According to a research report published by CICC, looking ahead to 2024, demand in the paper industry is expected to continue at a moderate pace of recovery. The peak period of production capacity release is coming to an end as a whole. Cost-side wood pulp, waste paper, and coal prices will mainly fluctuate moderately, and industry profits are expected to recover steadily.

The Zhitong Finance App learned that CICC released a research report saying that looking ahead to 2024, demand in the paper industry is expected to continue at a moderate pace of recovery, the peak period of production capacity release is coming to an end, the cost of wood pulp, waste paper, and coal prices will mainly fluctuate moderately, and industry profits are expected to recover steadily. Under this benchmark situation, the bank favors a combination of rich margins of safety and both offense and defense in stock selection.

CICC's main views are as follows:

Demand is moving towards a moderate recovery. The papermaking sector is known as a “barometer of consumption”. In 2023, the bank has observed that with the leading recovery in consumption scenarios and traffic, the popularity of cultural paper has clearly recovered, leading volume and price interest have been clearly boosted. Demand for wrapping paper and specialty paper has also followed a moderate recovery in the middle and low digits of physical goods, and prices and profits of 2H23 products have also improved markedly month-on-month. Looking ahead to 2024, the CICC macro team expects Social Zero to continue the moderate recovery trend. The bank expects a steady increase in demand for cultural paper in 2024, and that demand for wrapping paper (box board paper, white card) and specialty paper will continue to recover in single digits.

The release of production capacity is coming to an end, and we are still waiting for supply and demand to return to a tight balance. According to the bank's judgment, the industry is at the end of a new round of peak production expansion (driven by the peak of prosperity in 2020-21 and companies' concerns about difficulties in expanding production after the “double carbon” policy is strict), and production capacity expansion was concentrated in 2022-23 (box board corrugated paper also bears an additional supply impact of about 50% of the increase in imported paper). In 2024, the bank expects that the balance between supply and demand for cultural paper and some thin specialty papers will be relatively tight, while the additional production capacity for box board corrugated paper, white cardboard, and some specialty paper will still be in the medium to high single digits. The supply and demand side will depend on improving demand. However, judging from the progress of current production capacity, the bank expects that the pressure on new production capacity will be greatly reduced in 2025-26. If demand recovers faster, the overall supply and demand side of the industry is expected to return to a tight balance ahead of schedule.

Costs have moved from a “roller coaster” to stability, and leading diversification and integrated layout have entered a harvest period. Due to a certain contradiction between supply and demand, the profits of the paper industry in 2022 were squeezed by the combined rise in coal prices and pulp. The price of 1H23 raw materials dropped sharply, and competition for raw paper prices intensified, causing damage to industry profits. The challenges facing the industry on the cost side in 2024 are expected to be greatly alleviated: the bank expects pulp prices to continue to fluctuate around $600/ton, waste paper prices will continue to bottom, and coal prices are expected to drop slightly. This combination is expected to support a moderate recovery in overall industry profits. What is also encouraging is that in order to smooth out cost fluctuations, on the one hand, many leaders are striving to promote product diversification and high-end, and on the other hand, actively promoting the integrated layout of forest pulp and paper. From 2H23 to 2024, these companies' diverse products and homemade wood pulp are expected to enter the harvest period, and the bank expects to increase the company's margin of safety and growth momentum.

Risks: Demand falls short of expectations; new supply exceeds expectations; core raw material prices fluctuate beyond expectations.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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