The trend of performance improvement is clear, yet the stock price remains sluggish. Amid divergent views, when will ND PAPER (02689) reach an inflection point?

Over the past month, the stock price movement of ND PAPER (02689) has been quite dramatic. After hitting an intraday high of HK$8.43 on August 10, the stock price of this packaging paper industry leader has been trending downward, closing at HK$5.93 as of September 23, with a cumulative decline of nearly 30% during the period. It is worth mentioning that during this period, ND PAPER also disclosed a positive profit alert announcement. However, on the very day the positive profit alert was disclosed, ND PAPER's stock price turned from gains to losses after the afternoon opening, ultimately closing down 16.8% for the day. Although ND PAPER's stock price rebounded somewhat afterward, it did not last long before entering another downward trend. According to the company's recently disclosed FY2026 results, for the year ended June 30, 2026, ND PAPER achieved revenue of RMB 75 billion, up 18.6% year-on-year; and achieved net profit attributable to shareholders of RMB 3.581 billion, up 102.6% year-on-year, showing a clear trend of performance improvement. As the dual festivals approach and the traditional peak season for the paper industry arrives, ND PAPER's six major production bases have recently intensively issued price increase notices, raising the prices of corrugated paper and kraft linerboard by RMB 50/ton, with the relevant price adjustment directives to take effect successively after October. Against the backdrop of peak season price increases and continued short-term capital outflow, whether ND PAPER's report card can provide some support for its stock price trend may become the focus of market attention in the next stage. Market divergence persists, stock price fluctuates in search of a bottom The intraday performance on the day the positive profit alert was disclosed is a key entry point for understanding ND PAPER's recent stock price movement. On the afternoon of August 20, ND PAPER's stock price "changed face," turning downward from positive territory right after the afternoon opening, ultimately closing down 16.8%, with market capitalization evaporating by more than HK$6 billion in a single day. In terms of trading volume, turnover significantly expanded that day, with full-day trading value reaching HK$751 million and a turnover rate of 2.31%, notably higher than the stock's average daily trading level over the past year, indicating that some funds were exceptionally resolute in exiting. Although the stock price rebounded somewhat in the following days, trading volume failed to continue expanding, and the rebound momentum weakened progressively, before re-entering a new round of downward trend and hitting a new stage 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 expectation gaps. UBS learned after exchanges with mainland investors following the positive profit alert that some investors had originally expected profits to exceed guidance by about 10%, and therefore viewed the net profit range of RMB 3.9 billion to 4.1 billion as "below expectations." However, this expectation revision more reflects short-term capital behavior rather than a negation of the company's fundamental trend. From a valuation perspective, the current stock price corresponds to a dynamic price-to-earnings ratio that has fallen below 7 times, at a historically low level, clearly having already digested to some extent the emotional impact following the positive profit alert. As the Mid-Autumn Festival 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 intensively issued price increase notices, raising the prices of corrugated paper and kraft linerboard by RMB 50/ton, with the relevant price adjustment directives to take effect successively after October. Relevant brokerage research reports point out that with the fourth-quarter demand peak season combined with cost-side support, the short-term outlook for containerboard and corrugated paper price increases is positive. From an industry perspective, containerboard and corrugated paper are the sub-sectors with the highest prosperity in this round of paper industry capacity expansion cycle. Since 2025, prices of cultural paper and white cardboard have continued to bottom out, while containerboard and corrugated paper, benefiting from a better supply-demand structure and cost-side support, have shown a bottoming and recovery trend in prices. Current industry inventory is at a relatively low level, and if peak season demand recovers moderately, restocking and demand resonance can be expected. In GMTEight's view, ND PAPER's stock price pullback after the positive profit alert is more the result of capital expectations being re-corrected; in the medium term, if peak season price increases can be successfully implemented and transmitted to the profit side, combined with cost savings brought by pulp-paper integration, the company's valuation may have room for repair. Performance improvement trend is clear, stock price awaits inflection point According to ND PAPER's disclosed FY2026 results, during the reporting period the company's sales volume increased 14% year-on-year to approximately 24.5 million tons, setting a historical high for four consecutive years; 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. Along with 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 profit margin rising to 14.6%, an increase of a full 3.1 percentage points. Thanks to product selling price increases being significantly higher in magnitude and speed than raw material cost increases, combined with cost savings brought by pulp-paper integration, ND PAPER's profit elasticity was fully released. 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 disclosure, 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 tons of designed annual fiber capacity and approximately 3.2 million tons of designed annual papermaking capacity. After all projects are completed, total designed annual wood pulp capacity will exceed 8.5 million tons, 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. Returning to the stock chart, the nearly 30% pullback over the past month or so has to some extent reflected the market's revision of positive profit alert expectations and a wait-and-see sentiment regarding the effectiveness of peak season price increases. ND PAPER's disclosed full-year results clearly demonstrate substantive improvement in the company's profit qualitygross profit margin up 3.1 percentage points, net profit attributable to shareholders doubled, and pulp-paper integration entering the harvest period. In the author's view, a certain divergence has formed between the valuation compression caused by short-term capital outflow and the trend of continued fundamental improvement. If fourth-quarter peak season price increases are smoothly transmitted, combined with cost savings from increased raw material self-sufficiency, ND PAPER is expected to usher in a dual repair of performance 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.