Zhitong Finance and Economics APP learned that Citigroup recently published a research report on the investment proposal of Lee & Man Papermaking Vietnam Hejing Project, saying that the investment budget of the project is too large and is unlikely to be realized soon, nor should it be the company's top agenda. The bank also pointed out that there is limited room for further rebound in corporate profits.

Lee & Man Paper and Japan's Hokuetsu jointly proposed to invest $3 billion in construction projects

According to the Saigon Times, Lee & Man Paper and Japan's Hokuetsu jointly proposed to develop a $3 billion complex in Ha Tinh, a coastal province in the north-central region of Vietnam, including a deep-water port, a logistics center and a paper mill. Paper), if the construction is successful, the annual production capacity of Lee & Man Paper will increase from the current 795,000 tons to 1 million tons. However, the project still needs to be discussed further with Vietnamese officials because they did not reach a conclusion at the last meeting. The bank believes that this plan is very preliminary and is unlikely to be implemented soon.

Citi pointed out that although management is studying feasibility, the project is unlikely to be realized soon due to the huge investment budget. Lee & Man Paper is actively looking for various investment opportunities in ASEAN, but it is still imperative to convert solid OCC into OCC pulp that can be imported into China in response to China's policy changes that will ban the import of solid OCC from 2020. From this perspective, the Hejing project investment proposal does not seem to be the top agenda.

Lee & Man's third quarter profit is expected to rebound

In addition, Citi said that due to seasonal demand and replenishment of downstream customers, Lee & Man Paper's net profit per ton will rebound slightly in the third quarter, with an average net profit of HK$600 per ton in the first half of the year. Under the current economic situation, the demand decline cycle and profits still have downside risks, and given that the current profit is higher than the historical average of 2001 to 2018 (HK$482/ton), the bank believes that there is limited room for further profit rebound. On the other hand, Lee & Man Paper's new tissue factory in Jiangxi will start operations at the end of this year, which will increase the company's total paper production capacity by 100,000 tons to 895,000 tons.

Vietnam's Lee Young has an annual production capacity of 400,000 tons of cardboard paper production line and officially put into operation in March 2017. At present, the factory has nearly 1,000 employees and one production line. According to the long-term development plan, the company will continue to expand investment.