[ET Net News Agency, 19 September 2018] Citi Research said Nine Dragons Paper
(NDP)(02689) FY2018 net profit before FX surged 65.1% yoy to Rmb7,869mn, slightly ahead of
the earlier profit alert and consensus of Rmb7,589mn.
NDP's 2H FY2018 net dollar margin stood at Rmb525/t, which is better than Citi's
expectation of Rmb500/t though lower than Rmb691/t in 1H FY2018 amid lower seasonality.
Dividend payout ratio was 29.7% in FY2018 on par with 29.4% of FY2017 based on core
earnings (excluding FX).
The schedule on the commencement of some new lines has been delayed including Hebei,
Dongguan and Quanzhou (to be installed either in Quanzhou and or Vietnam), implying
increasing difficulty to add new capacities in the industry amid the tightening
environment policy, Citi noted.
It reiterated its "buy" call on NDP for low valuation and almost no new licenses in
China for adding capacity so the capex will drop in FY2020. Citi will review its forecasts
and target price of HK$23 after analyst briefing scheduled this morning.
Citi said NDP's capex is set at Rmb6bn for FY2019 but lowers to Rmb2bn in FY2020
reflecting limited new licenses for capacity expansion ahead in China. Citi doesn't rule
out that NDP will expand outside China but the time for taking license is more uncertain.
(KL)