Citi has released a research report stating that it has lowered its target price for ND PAPER (02689) from HK$8.8 to HK$5.8, reflecting weak potential profit margins, while maintaining a Neutral rating due to relatively undemanding valuation.

The bank noted that the target price cut is mainly driven by expectations of continued weak consumption trends, as August retail sales growth fell short of expectations, and recent pre-sale property reforms will delay property sales until after project completion; it expects China's pulp costs may decline for the remainder of the year due to increased industry supply, with companies pursuing vertical integration models like ND Paper's.

The bank also raised its earnings per share forecasts for fiscal year 2027 by approximately 5% and for fiscal year 2028 by approximately 2%, reflecting the recent completion of perpetual bond redemption which should save on interest costs.

Citi is more bullish on Lee & Man Paper Manufacturing (02314) within China's paper sector, as it expects falling pulp costs may bring upside potential to tissue paper profit margins.