Strong earnings in 1H26 – Nine Dragons Paper (NDP) is a leading paper manufacturer in China, specializing in packaging paper, high-end virgin paper and paper products. It reported a strong 1H26 results for the six months ended 31 December 2025 with revenue reaching RMB37.2bn, up by 11.2% YoY.  GPM expanded by 490bps to 14.4% while net profit surged by 225% YoY to RMB2.21bn.

The increase in net profit was mainly contributed by the increase in both sales volume and selling prices of the products, as well as the decrease in raw material costs. Sales reached 12.4mn tons during the period, a YoY increase of 8.3%, marking another record output for three consecutive years. The ASP saw a YoY increase of 2.7% against the market trend, contributing to steady revenue growth.

Pulp integration drives margin – The pulp-and-paper integration strategy is yielding results, aiming to replace purchased pulp boards and some wastepaper raw materials with self-produced wood pulp. A higher proportion of self-produced pulp has significantly lowered raw material costs and reduced exposure to volatile wood pulp prices, leading to more resilient cost control. Combined with higher selling prices, it underpinned the strong GPM hike.

Capacity expansion on track – NDP has kept its integration plan on schedule. As of 31 December 2025, total annual design capacity for fiber raw materials and paper reached approximately 8.2mn tons and 25.4mn tons, respectively. Upon completion of expansion projects in Beihai and Jingzhou, annual fiber raw material capacity will rise to 10.7mn tons (with paper capacity remaining at 25.4mn tons), increasing the self-sufficiency ratio to 42% from the current 32% and further strengthening cost control.

Table2: Planned Capacity Expansion Projects

Our view – With the pulp-and-paper integration and capacity expansion, NDP would have better control on raw material costs and hence likely to seek further margin enhancement. Looking ahead, government’s policies to boost domestic demand, coupled with the "replacing plastics with paper" environmental trend, are expected to improve the supply-demand dynamics in the paper industry. The counter is trading at 11.7x FY26E P/E.  (Research Department)