[ET Net News Agency, 9 January 2020] Goldman Sachs lifted its target price for Lee &
Man Paper (L&M)(02314) to HK$7.3 from HK$4.3 and upgraded its rating to "buy" from
"neutral".
The research house revised its earnings estimates for L&M by -5% for 2019, +99% for
2020, and +175% for 2021 to reflect its updated view on the containerboard margin outlook.
Goldman expects demand recovery at 2.8% for 2020 and output growth at only 0.8% due to a
tightened supply of raw material despite accelerated new additions. Driven by the demand
recovery, Goldman expects linerboard spread to improve by Rmb150/t in 2020 as it expects
to see tightness in linerboard supply with limited room for rising imports under less
favourable price parity and less imported waste paper.
Goldman estimated L&M currently has 84% sales volume from linerboard, and would benefit
the most among peers under linerboard spread improvement. Hence, it expects unit GP to
improve to HK$490/t in 2020 from HK$428/t in 2019. (KL)