Citi: Raises target price for LEE & MAN PAPER (02314) to HKD 5.5 and includes it in the list of preferred small and medium-sized stocks in China.

Citi published a research report stating that it has raised the target price for LEE & MAN PAPER (02314) from HK$4.8 to HK$5.5, based on a 9 times price-to-earnings ratio for 2026, which is in line with historical averages. This adjustment reflects a better-than-expected profitability outlook for toilet paper and is supported by a projected compound annual growth rate of 15% in earnings per share over the three years ending in 2028. The report reiterates a "Buy" rating for LEE & MAN PAPER and maintains a "Neutral" rating for ND PAPER (02689). Additionally, due to improved profitability prospects for toilet paper, LEE & MAN PAPER has been included in the preferred list of small and medium-sized stocks in China. LEE & MAN PAPER announced its half-year results, with net profit growth of 70.5% year-on-year to RMB 1.383 billion, reaching the high end of the previously forecasted range of RMB 1.33 billion to RMB 1.39 billion. The bank has kept its 2026 profit forecast unchanged; however, the company announced a 300,000 ton expansion of toilet paper production capacity in Guangxi starting August 2027, increasing total capacity by 25% to 1.5 million tons, leading to a 1% to 3% upward revision in profit forecasts for 2027 to 2028 while maintaining this year's profit estimate unchanged.