Paper mills have higher resistance to price increases.

This week, the papermaking sector is slightly stronger than the market. The papermaking sector rose 0.31% overall this week (key companies rose 0.32%), slightly stronger than the market (the Shanghai and Shenzhen 300 fell 0.07% in the same period).

Copper plate and white cardboard have been difficult to raise prices. Coated paper prices fell this week. The downstream demand was basically the same as that in August, the market sentiment was sluggish, and the dealers had no stocking power. The price of double-adhesive paper fell this week. The demand in East China is light, and the price of some mixed double-adhesive paper terminals is lowered by 100 yuan/ton. The dealerships in South China are slower and the paper prices are falling slightly. The price of gray-white board paper rose this week. Insufficient downstream orders, dealers operate cautiously, and paper mills have high inventory pressures. White cardboard prices fell this week. In the early period, the shouts of various paper mills did not receive market response. Some brands in South China fell by about RMB 100/ton from the end of August. The transaction price of cardboard paper and corrugated paper was stable. At the beginning of the month, in order to digest the inventory, the box board and corrugated paper factory in South China successively lowered the paper price by RMB 100-200/ton. After the price cut, the paper mills have improved their shipments. The transaction is still good this week and the price is relatively stable.

The international pulp price fell, the domestic pulp price rose, and the US waste ONP and OCC rose significantly. The domestic pulp market remained generally stable, and the recent gains slowed due to insufficient driving force in downstream demand. The US waste supply is insufficient, and after the price rises, the foreign reluctance to sell, coupled with the US port workers’ strike problems in transportation and the rumors of rising freight rates, the US waste price has risen strongly.

Pay attention to the review of the 2012 mid-year report of the paper and light industry sector. Papermaking: The contradiction between supply and demand has not improved significantly. Q2 has rebounded slightly, and Q3 earnings are expected to decline from the previous quarter. The key paper company's 12H1 revenue was 8% year-on-year, and its net profit fell 70.6%. The release of industry capacity and the weak macro demand have made corporate profits still bleak.

On a quarterly basis, Q2 results improved slightly from the previous quarter. However, with the entry into the industry's off-season from July to August, Q3 earnings are expected to decline from the previous quarter. Packaging and mass consumer goods: revenue growth is slightly affected by the downstream; low-operating leverage companies are more likely to benefit from the decline in raw materials, reflecting profitability. The overall downstream growth rate of packaging and mass consumer goods companies is relatively stable, and some of the downstream growth rate is slightly slowed by the impact of events (such as tobacco and some food industries).

From the perspective of profitability, companies with higher capacity utilization rates and relatively low labor cost ratios are more likely to benefit from lower raw material prices and significantly higher gross profit margins, reflecting profitability. Domestic sales of light industry: the economic downturn and the lag of consumption, the overall performance of 12H1 is sluggish. 1) Gold and silver jewellery and famous watches: the impact of consumption lag, the year-on-year growth rate of revenue dropped significantly, while the relatively rigid cost expenses were more drag on earnings when the growth rate fell. In the near term, benefiting from the rise in the price of gold, the performance of gold and jewellery listed companies is expected to enjoy the increase in volume and price, and the profitability can be improved. 2) Furniture: After experiencing the negative impact of the 12Q1 Spring Festival, the Q2 revenue growth rate rebounded slightly. Although the domestic furniture industry is affected by the regulation of real estate policies, the overall operating pressure is relatively large, but listed companies and others rely on their own accumulated brand channel effects to achieve performance beyond the industry. Export light industry: Order improvement, profit pressure is greater. Although the benefits of the overseas economy have picked up, orders have improved, but due to rising cost pressures such as labor and raw materials, earnings are still not optimistic. The export tax rebate rate is raised upwards or has an event catalytic effect on the stock price of the relevant company.

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