Paper industry is expected to rebound this year

February 02, 2023

A number of listed companies in the paper industry recently released annual performance forecasts, most of the performance decline. From a short-term perspective, the paper industry domestic demand grinding bottom, overseas demand is weak, the plate earnings continue to low. However, a brokerage firm said that the current cycle of industrial losses has reached 3 quarters, is expected to accompany the domestic economic recovery, pulp, paper trend divergence, corporate earnings steadily recovered.
An industry insider said to the Securities Times reporter, "the market situation in January this year has been signs of improvement, 2023 will be much better than 2022." Industry insiders analysis, with the downstream demand rebound and upstream raw material prices back down, 2023 paper industry earnings are expected to achieve sustained repair.
On Jan. 30, head paper company Chenming Paper released a performance forecast, expecting to achieve earnings of 290 million to 330 million yuan in 2022, down 86.12 percent to 84.21 percent year-on-year.
Chenming Paper said that during the reporting period, due to the epidemic, the domestic market demand was insufficient, and the sales of mechanism paper dropped year-on-year, which affected the efficiency play. At the same time, affected by the rising prices of raw materials and energy such as wood chips, chemicals and raw coal, production costs rose significantly year-on-year, resulting in a year-on-year decline in gross margin. The company said that with the gradual recovery of domestic demand in 2023, coupled with effective control of the cost side, the company's profitability is expected to be effectively improved.
Mountain Eagle International also recently released a performance forecast, expecting a loss of 2.245 billion yuan in 2022, mainly due to the decline in the gross margin of the main business and goodwill impairment of about 1.5 billion yuan. Mountain Eagle International said that from the cost side, due to the supply gap brought about by the ban on waste, pushing the national waste continued to increase prices.
Minfeng Special Paper recently announced that it expects 2022 full-year earnings of 12.6 million to 17.5 million yuan, down 78.39% to 69.99% year-on-year. Minfeng Special Paper said that during the reporting period, the company's main raw and auxiliary materials wood pulp and coal prices have been running at a high level, resulting in a large year-on-year increase in operating costs and a year-on-year decrease in the gross profit margin of the main business; during the reporting period, exchange gains decreased year-on-year, resulting in a year-on-year increase in financial expenses.
Shen Wan Hongyuan research report pointed out that the tight supply of wood pulp pushes the pulp price to remain high in 2022, the pulp price has been rising continuously since the bottom of November 2021, and the foreign quotation of coniferous pulp / broadleaf pulp in July 2022 is USD 1010/860 / ton, reaching a historical high, up 42% / 50% compared with the bottom of November 2021, bringing huge cost pressure to the paper industry and seriously squeezing the industry profit space.
According to the National Bureau of Statistics, from January to November 2022, enterprises in the paper and paper products industry above the scale had operating revenues of 137.652 billion yuan, up 1.2% year-on-year, operating costs of 1,216.86 billion yuan, up 4.1% year-on-year, and total profits of 47.8 billion yuan, down 38.6% year-on-year. As of November 2022, the number of enterprises with loss-making units in paper and paper products was 1,936, an increase of 37.5% year-on-year. The number of corporate losses was the highest in the past three years.
The difficult profit environment has also contributed to the accelerated reshuffling of the industry, driving the continued optimization of the industry landscape.
From the 27 listed paper enterprises published three quarterly reports, the first three quarters of five listed paper enterprises revenue total break 100 billion, accounting for nearly 70%. According to the China paper association data, China's above-scale paper enterprises have been reduced for seven consecutive years.
Guosheng securities pointed out that the experience of industry passive depot, the current enterprise inventory tends to be reasonable, demand recovery is expected to appear at the end of the first quarter of 2023. "Short-term domestic demand grinding bottom, overseas demand weakness, plate earnings continue low; but the current cycle of industrial losses has reached 3 quarters, is expected to be accompanied by domestic economic recovery, is expected to replicate the situation in 2019, the industry will be strong price, pulp, paper trend divergence, corporate earnings steady recovery. At present, the pulp system valuation pivot down, waste paper system at the bottom of history, preferably both pattern & growth subject, which focus on recommending the sun paper, Bohui paper, focus on the mountain eagle international, nine dragons paper, Yueyang forest paper, Chenming paper, etc."
For the 2023 market, mountain eagle international that, with the orderly recovery of consumption and industry chain replenishment of demand elasticity, the paper industry uncertainty factors significantly reduced, coupled with "stable growth" policy to accelerate the pace of landing, for the post-epidemic economic stabilization to provide support, is expected to restore the overall industry boom.
It is reported that the mountain eagle international paper production capacity steadily on the ground, in May 2022, October, wholly-owned subsidiary of Guangdong mountain eagle 1 million tons of paper project engineering start. In terms of construction projects, Zhejiang Shangying 770,000 tons of paper projects, Jilin Shangying Phase I 300,000 tons of corrugated paper and 100,000 tons of straw pulp project smooth progress, about 2 million tons of new landed production capacity in 2023, the industry stabilization rebound, is expected to achieve a further increase in production and sales scale and profitability level repair, taking into account factors such as capacity climbing, sales in 2023 is expected to increase by 20% compared with 2022 above, with greater room for earnings growth.
Chenming Paper also said that in 2022, on the production side, the company has cooperated with world-class pulp and paper machinery suppliers such as Germany Voith, Finland Vimed and ANDRITZ in recent years to upgrade and replace paper-making equipment, improve process levels and expand operational effects. On the supply side, the company launched the "forest pulp and paper integration" strategy to achieve the basic balance of pulp and paper production capacity of pulp and paper integrated enterprises, smoothing the fluctuations of the main upstream raw materials. It is expected that in 2023, the paper industry is expected to usher in a marginal improvement in operating results as favorable factors such as smooth transportation, falling pulp and recovering consumption overlap.
Analysts point out that a variety of signs indicate that the industry is already at the bottom of the profitability, along with the gradual recovery of market demand and the rational return of costs, corporate earnings are expected to achieve repair. At the same time, in the context of the continued optimization of the industry pattern, the head of the industry chain, represented by Chenming Paper, is expected to take the lead in the post-epidemic era with its advantages in strategy, products, research and development, technology and management.

Author:

Mr. Ma Yanfeng

E-mail:

sandy@zhongzhi.cn

Phone/WhatsApp:

8615200088110