Over the past month, the share price trajectory of ND PAPER (02689) has been quite dramatic.
After touching an intraday high of HK$8.43 on August 10, shares of this packaging paper industry leader have been on a downward slide, closing at HK$5.93 as of September 23, a cumulative decline of nearly 30% during that period.
It is worth noting that during this time, ND PAPER also released a positive profit alert. Yet on the very day the profit alert was disclosed, ND PAPER's share price turned from gains to losses after the afternoon session opened, ultimately closing down 16.8% for the day. Although the stock rebounded somewhat afterward, the recovery did not last long before it resumed its downward search for a bottom.
According to the company's recently disclosed fiscal year 2026 results, for the year ended June 30, 2026, ND PAPER achieved revenue of RMB 75 billion, up 18.6% year-on-year; and realized net profit attributable to shareholders of RMB 3.581 billion, up 102.6% year-on-year, showing a clear earnings improvement trend.
With the dual holidays approaching and the traditional peak season for the paper industry arriving, ND PAPER's six major production bases have recently issued price increase notices in quick succession, raising corrugated paper and kraft linerboard prices by RMB 50 per tonne, with the relevant price adjustment directives set to take effect progressively after October. Against the backdrop of both peak-season price hikes and continued short-term capital outflows, whether this earnings report can provide some support for the share price trend may become the market's focus in the next phase.
Market Divergence Persists as the Stock Price Searches for a Bottom
The intraday performance on the day the profit alert was disclosed is a key entry point for understanding ND PAPER's recent trajectory. On the afternoon of August 20, ND PAPER's share price "changed face," reversing from positive territory when the afternoon session opened and ultimately closing down 16.8%, with more than HK$6 billion in market capitalization evaporating in a single day. In terms of trading volume, turnover that day was significantly elevated, with full-day trading value reaching HK$751 million and a turnover rate of 2.31%, well above the stock's average daily trading level over the past year, indicating that some funds were exceptionally resolute in their exit. Although the share price rebounded somewhat in the following days, trading volume failed to sustain the expansion, the rebound momentum weakened with each successive attempt, and the stock soon re-entered a new downtrend, hitting a new phase low on September 23.
Why did the market "not buy" the positive profit alert? According to a UBS report, based on feedback from the bank's communications with investors, the core reason lies in an expectations gap. UBS learned after the profit alert from exchanges with mainland investors that some investors had originally expected profits to come in about 10% above guidance, and therefore viewed the net profit range of RMB 3.9 billion to RMB 4.1 billion as "below expectations." However, this expectation revision more reflects short-term capital behavior rather than a rejection of the company's fundamental trend. From a valuation perspective, the current share price corresponds to a forward price-to-earnings ratio that has fallen below 7 times, at a historically low level, which clearly has already absorbed to some extent the emotional impact following the profit alert.
As the Mid-Autumn and National Day holidays approach, the traditional peak season for the paper industry has arrived as expected. ND PAPER's six major production bases have recently issued price increase notices in quick succession, raising corrugated paper and kraft linerboard prices by RMB 50 per tonne, with the relevant price adjustment directives set to take effect progressively after October. Relevant brokerage research reports point out that with the fourth-quarter demand peak season combined with cost-side support, containerboard and corrugated paper prices are viewed favorably for short-term increases. From an industry perspective, containerboard and corrugated paper are the sub-sectors with the highest prosperity in this round of paper industry capacity expansion. Since 2025, cultural paper and white cardboard prices have continued to grind along the bottom, while containerboard and corrugated paper, benefiting from a better supply-demand structure and cost-side support, have shown a bottoming-out and recovery trend in prices. Current industry inventories are at relatively low levels, and if peak-season demand recovers moderately, a resonance between restocking and demand can be expected.
In the view of Zhitong Finance, ND PAPER's share price pullback after the profit alert is more the result of capital expectations being re-calibrated; in the medium term, if peak-season price increases can be successfully implemented and transmitted to the profit level, combined with cost savings from pulp-paper integration, the company's valuation may have a window for recovery.
Earnings Improvement Trend Is Clear as the Stock Awaits an Inflection Point
According to ND PAPER's disclosed fiscal year 2026 results, during the reporting period the company's sales volume increased 14% year-on-year to approximately 24.5 million tonnes, setting a historical high for the fourth consecutive year; average selling price rose about 4% year-on-year against the trend, and driven by both volume and price increases, ND PAPER's revenue grew nearly 20% year-on-year to RMB 75 billion.
Alongside the increase in scale, ND PAPER's profitability also improved. Data shows that during the period, the company's gross profit increased 50.8% year-on-year to RMB 10.925 billion, with the corresponding gross margin rising to 14.6%, an increase of a full 3.1 percentage points. Thanks to product selling price increases that were significantly higher in magnitude and speed than raw material cost increases, combined with cost savings from pulp-paper integration, ND PAPER's profit elasticity was fully unleashed. During the same period, the company's net profit attributable to shareholders successfully doubled.
While profitability improved substantially, ND PAPER's capital expenditure focus is also tilting toward the upstream raw material end. According to the annual report, the company is advancing fiber and papermaking capacity construction in Hubei Jingzhou, Chongqing, Tianjin, Guangxi Beihai, Guangdong Dongguan, and Jiangsu Taicang, involving approximately 3.8 million tonnes of designed annual fiber capacity and approximately 3.2 million tonnes of designed annual papermaking capacity. Once all projects are completed, total designed annual wood pulp capacity will exceed 8.5 million tonnes, and the raw material self-sufficiency rate will achieve a leapfrog improvement, laying the foundation for the continued realization of the pulp-paper integration strategy.
Back to the trading screen, the nearly 30% pullback over the past month or so has to some extent reflected the market's revision of profit alert expectations and a wait-and-see attitude toward the effectiveness of peak-season price increases. Meanwhile, ND PAPER's disclosed full-year results clearly demonstrate a substantive improvement in the company's earnings quality — a 3.1 percentage point increase in gross margin, a doubling of net profit attributable to shareholders, and pulp-paper integration entering a harvest period. In the author's view, a certain divergence has formed between the valuation compression caused by short-term capital outflows and the trend of continued fundamental improvement. If fourth-quarter peak-season price increases are smoothly transmitted, combined with cost savings from an improved raw material self-sufficiency rate, ND PAPER is expected to welcome a dual recovery in earnings and valuation. For investors, ND PAPER's current valuation is already at a historically low level, and once subsequent paper price trends and inventory destocking verify the strength of the peak season, the company's investment value may be re-examined.