Jinwu Financial News | According to Guosheng Securities Research Report, Nine Dragons Paper (02689) released the FY2024H1 performance report: FY2024H1 achieved revenue of 30.611 billion yuan (-1.9% YoY), net profit to mother of 292 million yuan (+121.1% YoY), and sales volume +16.3% YoY to 10 million tons, excluding net profit and loss of 35 yuan per ton (both FY2023H1/H2 tons net profit of over 150 yuan). In the second half of 2023, the industry recovered moderately, market demand picked up, raw material costs declined, and profits improved markedly from month to month. Currently, industry demand has improved, and the company has issued price increase letters and price increases are gradually implemented. Along with product structure optimization (rich raw material structure, increased share of middle and high-end products) and financial cost savings (debt structure optimization), the bank expects profits to continue to recover.
According to the bank, due to weak industry demand in 2023, the company postponed part of its production expansion plan. FY2024H1 capital expenditure was -38.7% year-on-year to 6.60 billion yuan. We expect the company's capital expenditure and debt size to gradually decline from a high point (FY2024H2 is estimated to be 6.4 billion yuan), depreciation and interest expenses will slow down, and bottom profit is expected to consolidate and improve. In addition, Y2024H1 was accompanied by a decline in papermaking costs and a recovery in downstream demand. The decline in raw material costs was higher than the drop in product prices, and wood pulp was put into operation at various bases. The company's fiber raw material mix was gradually optimized, raw material costs were further reduced, and the company's profit recovered month-on-month.
The bank continued that demand picked up during the FY2024H1 peak season, combined with savings in raw materials and energy consumption costs, and profit improved month-on-month. The company's category structure continues to be rich, and the raw material base layout is expected to consolidate bottom profit. The bank expects FY2024-2026's net profit to be 800 million yuan/2 billion yuan/3.3 billion yuan respectively, and the corresponding PE is 20X/8X/5X, respectively, maintaining a “buy” rating.