CICC has released a research report reiterating its 'Outperform' rating for ND PAPER (02689), maintaining its profit forecasts and target price. The current share price implies a FY26-27 P/B of 0.5x. The HK$12 target price corresponds to a FY26-27 P/B of 0.9x and 0.8x, representing a potential upside of 64%.
Key Developments
The company announced two key updates on June 15, 2026. Firstly, it initiated a cash repurchase of its US$400 million 14% perpetual bonds, which will be cancelled immediately upon completion. Secondly, it entered into loan agreements with several banks for a three-year RMB 2 billion facility.
Perpetual Bond Repurchase Highlights Management Confidence
The US$400 million perpetual bonds were issued in June 2024 for general corporate purposes. They have no fixed redemption date and carry a fixed annual coupon of 14% for the first three years (until June 2027), resulting in annual interest expenses of approximately RMB 400 million. Management and related parties collectively hold 81% of these bonds. The repurchase offer included a 7% early-bird premium, which management voluntarily waived, committing to accept the general repurchase price after the early-bird period. This move is estimated to represent a concession of about US$23 million. The repurchase will be funded by the new RMB 2 billion syndicated loan and internal resources. Following the full repurchase, the company's annual interest expenses are projected to decrease by roughly RMB 300 million. This action aligns with the company's prior public commitment to early redemption and, coupled with management's waiver of the premium, underscores their long-term confidence in the business.
Containerboard Market Shows Strong Pricing Momentum
The report notes that containerboard and corrugating medium prices have risen steadily since April, with increases of RMB 180 and RMB 320 per tonne to RMB 3,735 and RMB 3,030 per tonne, respectively. The primary drivers for this price hike are identified as rising wastepaper costs, coordinated maintenance shutdowns and price increase notices from major producers, and a mild demand recovery supported by export orders. Looking ahead, with effective price coordination among leading producers, seasonal demand catalysts, and a slowdown in new capacity additions in the sector, further price increases for containerboard are anticipated. Profit recovery for this segment is expected to outperform other paper grades.
Potential Risks Outlined
Key risks include weaker-than-expected demand, significant volatility in pulp prices, capital expenditures exceeding expectations, and an excessively high debt ratio.