Analysts have issued a report maintaining their "Outperform" rating for ND PAPER (02689), with no changes to earnings forecasts or the target price. The current share price implies a FY26-27 price-to-book (P/B) ratio of 0.5x. The HK$12 target price corresponds to a FY26-27 P/B of 0.9x and 0.8x, suggesting a potential upside of 64%. The key points from the analysis are as follows.
Company Developments
The company announced two key developments on June 15, 2026. First, it initiated a cash repurchase of its $400 million 14% perpetual bond, with the bonds to be cancelled immediately upon completion. Second, it entered into loan agreements with several banks for a three-year, RMB 2 billion credit facility. This repurchase aligns with the company's previous public commitments to redeem the bonds early, a move that signals management's confidence in the firm's prospects.
The $400 million perpetual bond was issued in June 2024 for general corporate purposes. It has no fixed redemption date, carries 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 this bond. According to the announcement, the repurchase included an early-bird premium of 7%, which management voluntarily waived, committing to accept the general repurchase price after the early-bird period. This is estimated to represent a concession of about $23 million. The company plans to fund the repurchase using proceeds from the new RMB 2 billion syndicated loan and its own internal funds.
Based on this, the analysis estimates that full redemption of the perpetual bond could reduce the company's annual interest expenses by roughly RMB 300 million. The move is seen as fulfilling the company's earlier pledge to redeem the bonds ahead of schedule, with management's decision to forgo the premium further demonstrating long-term confidence in the business.
Market Conditions and Outlook
Recent market sentiment for containerboard and corrugating medium paper has been positive, with prices rising steadily since April. Prices have increased by RMB 180 and RMB 320 per tonne to RMB 3,735 and RMB 3,030 per tonne, respectively. The analysis attributes this price increase primarily to rising wastepaper costs, coordinated maintenance shutdowns and price hike notices from major paper mills, and a modest demand recovery driven by export orders. Looking ahead, with effective price coordination among leading producers, seasonal demand catalysts, and a tapering off of new industry supply, there is believed to be further room for price increases in this segment. Profit recovery for these grades may outpace that of other paper products.
Key Risks to Consider
Potential risks include demand falling short of expectations, significant volatility in pulp prices, capital expenditures exceeding forecasts, and an excessively high debt ratio.