Bank of America Securities has released a research report noting that Lee & Man Paper Manufacturing Ltd (02314) saw a recovery in its containerboard and tissue paper business profit margins, along with a 12% increase in sales volume, driving a 69% rise in net profit after tax for the first half of the year.

Management indicated that the company managed to continue raising prices in the containerboard market during the typically quiet second quarter, suggesting the market is gradually recovering from years of oversupply. With the peak season approaching in the second half, the broker expects further margin improvements.

Due to the improved profit outlook, the bank has raised its earnings forecasts for 2026, 2027, and 2028 by 23%, 11%, and 7%, respectively. The target price has been increased from HK$3.80 to HK$4.50, with a "Buy" rating maintained.

Lee & Man Paper is investing 6 billion yuan in its Guangxi Guigang project, planning to build 750,000 tonnes of pulp capacity and 300,000 tonnes of tissue paper capacity, with production expected to begin in August 2027. Bank of America Securities believes that upon completion, the group's total capacity will increase to 1.7 million tonnes of pulp and 1.5 million tonnes of tissue paper, making it China's second-largest vertically integrated pulp and tissue paper producer. This is expected to support future growth in the pulp and tissue paper business.