HSBC Global Research lifted its target price for Nine Dragons Paper (NDP)(02689) to HK$12.5 from HK$10.5 and maintained its "buy" rating.
The research house said NDP's NPAT of RMB4.2bn in FY2020 is much stronger than expected. It also means that earnings in 2H grew by 20% despite the COVID-19 impact.
UBS said next year is a special year. It believes that as waste paper imports are completely banned, margin expansion is likely to continue. UBS does not think there will be enough domestic wastepaper to fill the supply shortage, therefore, domestic wastepaper prices will rise, and lead to even higher packaging paper prices and improvement in margins for industry leaders that have secured enough raw materials.
It raised its earnings estimates for FY2021 and 2022 by 10% and 7%, respectively, on higher GP/t assumptions.
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