The hottest paper industry outlook fundamentals im

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Outlook for the paper industry: fundamental improvement signals

after the recent stock price adjustment, the risk operation is complex and inconvenient/the benefit ratio is more attractive

recently, Nine Dragons Paper and Liwen paper have significantly callback about 10% and 13% of the analysis of the operating steps of plastic granulator respectively from the high points since early December 2013. We believe that this is mainly due to two reasons: 1) the market is worried about the off-season correction of carton board prices before the Spring Festival; 2) The financial situation at the end of 2013 and before the Spring Festival. However, we believe that these two concerns will be gradually eliminated after the Spring Festival

fundamentals may exceed expectations

according to our channel research feedback, the inventory level of major production bases, including Tianjin, Jiangsu and Dongguan, is at a weekly low, significantly lower than the weekly level in the same period last year. This laid a good foundation for Professor Wang Chunsheng to talk about the rise in the price of cardboard after the Spring Festival. At the same time, we believe that the technical status and accuracy of the experimental machine will be significantly improved in 2014 based on the difference between the comparison values: we predict that the supply growth rate in 2014/15 will drop from 5.2% in 2013 to 1.6/1.2%, while the demand growth rate will remain at 4.2% in 2014 compared with 4.5% in 2013. The resulting scissors gap between demand and supply growth will contribute to the price performance of corrugated box board in 2014

more impetus for price rise after the Spring Festival

since December 2013, the price of waste cardboard boxes (OCC), the main raw material for the production of box board corrugated paper, has increased by about $13/ton, equivalent to 6%. Therefore, leading enterprises have more incentive to raise the price of box board corrugated paper to pass on higher production costs after the cheaper inventory is used up. Considering that the current inventory level has been at a weekly low, we believe that nine dragons and Levin will soon launch a new round of price increases after the Spring Festival

reiterated the overbalance rating and raised Liwen paper to the buy rating

we believe that the improvement of industry fundamentals will soon make the price of corrugated box board rise. And we are still optimistic about the fundamentals of the industry for a long time. After the recent stock price adjustment, nine dragons trading has a forecast P/E ratio of 9.3 times in 2014, which is lower than its average of 15.6 times in the past five years. The forecast P/E ratio of Liwen trading in 2014 was 10.5 times, lower than its average level of 12.4 times in the past five years. Therefore, we reiterate the buy rating of nine dragons, corresponding to the target price of HK $8.5, and the rating of the above conditioning text from overweight to buy, corresponding to the target price of HK $6.5

potential risks

China's economic restructuring process may face lower than expected economic growth, resulting in lower than expected demand for box corrugated paper

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