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April, 2025
Shanghai New International Expo Centre, Shanghai, China

This industry is expected to have a "bottom reversal", and ShanYing INTL is waiting for the demand to warm up

Corrugated board is the main packaging paper at present, and its application range extends to food and beverage, household appliances, clothing, shoes and hats, medicine, express delivery and other industries in life. Corrugated paper can not only replace wood and plastic with paper, but also can be recycled. It is a green packaging material, and the demand is huge at present.


Looking back to 2022, China’s consumer market was greatly impacted by the epidemic, and the total retail sales of consumer goods fell by 0.2%. Affected by epidemic, from January to September 2022, China's total consumption of corrugated paper was 15.75 million tons, down 6.13% from the same period last year; The total consumption of carton paper in China was 21.4 million tons, down 3.59% from the same period last year. In terms of price, the average price of carton paper market fell by 20.98% throughout the year; The average price of corrugated paper fell by 31.87% throughout the year.

According to the news, in the six months ended December 31, 2022, the loss attributable to the equity holders of Nine Dragon Paper is expected to reach about 1.250-145 billion yuan. ShanYing INTL has previously released an annual performance forecast. In 2022, it realized a net profit attributable to the parent company of 2.245 billion yuan, and a net profit attributable to the parent after deducting non-recurring profit of 2.365 billion yuan. This is the situation that the two companies have never had since their establishment.


It can be seen that in 2022, due to the influence of geopolitics and costs of upstream raw material, the profit space of the paper industry will be constrained. As the leader of paper packaging, the narrowing of profits of Nine Dragon Paper and ShanYing INTL is actually a common problem of the whole industry in 2022.


However, with the release of capacity of wood pulp in 2023, ShenWan HongYuan Securities  pointed out that it is expected that the imbalance between supply and demand of wood pulp will be eliminated in 2023, and the pulp price is expected to return from the high to the historical central price. In the process of the price decline of upstream raw materials, the product price of special paper with better balance of supply and demand and competitive pattern is relatively stable, which is expected to release the profit elasticity. In the medium term, if the consumption recovers, the demand for bulk paper is expected to improve, the replenishment of the industrial chain will bring demand elasticity, and the profit and valuation of bulk paper are expected to rise from the bottom.


In addition, the industry is still in the expansion period, and the main driving force for expansion is leading enterprises. Excluding the impact of epidemic, the capital expenditure of major listed companies in 22Q1 accounted for 6.0% of the industry's fixed asset investment. The proportion of leading capital expenditure in the industry continues to increase. Small and medium-sized paper enterprises are under great external pressure due to the impact of epidemic situation, sharp fluctuations in raw material and energy prices, and environmental protection policies, and gradually lose competitive advantage. The industry will gradually move towards integration. For example, Guangdong Shanying, a wholly-owned subsidiary of Shanying International, has successfully launched its 1 million ton paper project in 2022. The projects under construction, Zhejiang Shanying 770000 ton paper project and Jilin Shanying Phase I 300000 ton corrugated paper and 100000 ton straw pulp project, have been successfully promoted, and will quickly become the company's new profit growth point.


ShenWan HongYuan Securities said that the layout of new categories of paper not only provides new growth space for enterprises, but also provides enterprises for stronger flexibility in profits because of the difference in profits between different types of paper; With the improvement of category layout, the paper industry leader is expected to break through the profit periodic fluctuation of a single variety.


It is worth noting that during the Spring Festival, the enthusiasm of the paper mill for price adjustment decreased. In January, the market prices of corrugated and carton paper rose and fell, and the average price adjustment was limited. As of January 31, the average monthly price of China's AA-grade corrugated paper market was 3,265 yuan/ton, with a month-on-month increase of 0.11% and a year-on-year decrease of 16.22%; The average monthly price of China's carton board market was 4413 yuan/ton, down 0.27% month-on-month and 9.98% year-on-year. This year, the price trend of corrugated board market will continue to be affected by the industry supply and demand pattern and the upstream cost price changes. The market supply and demand game will continue. The challenges facing the market in 2023 will not be underestimated.