Against the backdrop of the overall downturn in the paper industry, the third quarter report of Sun Paper (002078. SZ) has become a rare bright spot in the industry's cold winter.

On the evening of October 28th, Sun Paper Industry disclosed its third quarter report for 2026, with a revenue of 31.964 billion yuan in the first three quarters, a year-on-year increase of 10.46%; The net profit attributable to the parent company was 2.922 billion yuan, a year-on-year increase of 16.88%.

On October 30th, regarding the reasons for the performance increase, a reporter called Sun Paper as an investor. The relevant staff of the company's securities department said, "The company has always had production capacity investment, which is one of the factors affecting its operating performance. At the same time, the company has economies of scale and has always adhered to the strategy of integrating forestry, pulp and paper. Last year, the overall operating performance of the company was decent, with good cost control and sales. The above comprehensive factors jointly support the company's profitability level

Along with the performance announcement, there is also a new round of production expansion. The company plans to invest in two projects in the Yandian factory area of its Shandong base: an annual production of 500000 tons of natural biomass fibers (chemical wood pulp) and supporting projects such as alkali recovery, with an estimated total investment of 2.5 billion yuan; The annual production of 600000 tons of green paper-based packaging new materials project is expected to have a total investment of 1.5 billion yuan. The two projects total 4 billion yuan, with a construction period of 18 months each, and both require submission to the company's shareholders' meeting for review.

Two more sons have fallen from Shandong base

The relevant staff of the Securities Department of Sun Paper Industry stated that the company believes that the overall economy will gradually improve in the packaging paper sector. With the continuous upgrading of the national living standards, the mid to high end packaging paper will have greater market space, which is also one of the development directions of the company.

Sun Paper Industry was founded in 2000 and is a multinational integrated forestry, pulp and paper group headquartered in Jining City, Shandong Province. It has pulp and paper production lines. At present, the company's packaging paper business includes cowhide cardboard, high-strength corrugated paper, and food grade environmentally friendly packaging paper, which are the core businesses of the company. By the end of 2025, the company's total production capacity of packaging paper will reach 4.4 million tons, with over 80% of its products being mid to high end.

According to the company's announcement, the annual production of 600000 tons of green paper-based packaging new materials project will mainly use recycled fibers and commercial wood pulp as raw materials to produce paper-based packaging new materials. The supporting project of producing 500000 tons of natural biomass fiber and alkali recovery annually will use commercial wood chips as raw materials to produce natural biomass fiber (chemical wood pulp).

From a positioning perspective, the two projects are not isolated expansion projects, but rather focus on two main lines: the product end and the cost end of Sun Paper Industry. The former will further enhance the production capacity of Shandong base in the packaging paper field, and further improve the grade and quality of the base's packaging paper products. The latter will further enhance the self-produced pulp production capacity of the Shandong base, effectively reduce dependence on purchased wood pulp, and help improve the grade and quality of related paper products, thereby enhancing the cost control ability and market competitiveness of the Shandong base's products.

In terms of investment pace, Sun Paper Industry has provided a clear timetable: if approved by the shareholders' meeting and relevant national departments, the two projects are planned to be implemented within 2026, with 20% of the total investment completed by the end of 2026, and the entire investment completed in the fourth quarter of 2027. The new production line will enter the trial production stage.

Sun Paper Industry stated that the implementation of the 600000 ton green paper-based packaging project in its Yandian factory area is in line with Sun Paper Industry's "4-3" medium - and long-term development strategy. It is an important measure for the company's "three major bases" in Shandong, Guangxi, and Laos to achieve efficient and coordinated development, further promoting the company's creation of the optimal "forest pulp paper integration" full industry chain system, continuously enhancing the company's core competitiveness, and ensuring high-quality and sustainable development of the enterprise.

According to the third quarter report of Sun Paper, the production capacity echelon of the company's Shandong base is forming intensively. In January of this year, the second phase of 140000 tons of special paper was put into operation in the Yandian factory area. In August, the project to produce 700000 tons of high-end packaging paper was put into operation. In September, the supporting engineering projects to produce 600000 tons of bleaching chemical pulp and alkali recovery were put into operation. Combined with the announcement of the 500000 tons of natural biomass fiber and 600000 tons of green paper-based packaging project, the Shandong base further strengthened its self-produced pulp guarantee capability, and the product matrix of packaging paper and special paper also tended to be complete.

In its 2025 annual report, Sun Paper stated that the company is firmly committed to the development path of "forest pulp paper integration", and has built a global industrial pattern of efficient collaboration and complementary advantages among the three major bases in Shandong, Guangxi, and Laos. It has created an end-to-end integrated system of the entire industry chain from forestry planting, pulp making, papermaking, biomass refining to terminal sales, forming a "supply chain resilience and cost moat" with competitive advantages.

Huatai Securities pointed out in its review of Sun Paper's third quarter report that in the context of industry demand still needing to be repaired, the company's cost advantage of integrating forestry, pulp and paper and flexible scheduling of multiple paper types can help hedge against fluctuations in a single paper type and support profitability resilience; With the increase of new pulp and paper production capacity in Shandong, sales growth and self made pulp substitution are expected to further contribute to the increase in performance.

Significant Industry Differentiation

According to the announcement from Sun Paper, the company's revenue for each quarter of 2026 will increase quarter by quarter. The revenue for the first, second, and third quarters will be 10.083 billion yuan, 10.779 billion yuan, and 11.102 billion yuan, respectively, with the highest revenue scale in the third quarter; On the profit side, the net profit attributable to the parent company in the third quarter was 971 million yuan, higher than 906 million yuan in the first quarter and lower than 1.045 billion yuan in the second quarter.

Huatai Securities commented on the third quarter report of Sun Paper, stating that according to Longzhong Information and our calculations, the national average price of box board paper/corrugated paper in the third quarter was 3780/3276 yuan/ton, an increase of 5.9% and 15.6% year-on-year, respectively. However, the average price fell month by month from July to September; The average prices of double adhesive paper and copperplate paper were 4397/4664 yuan/ton, a year-on-year decrease of 9.3% and 13.3%, respectively. The price of cultural paper is still under pressure. In terms of pulp price, the average price of domestic broad-leaved pulp/chemical pulp is 4454/2720 yuan/ton, with a year-on-year increase of 8.7%/8.8%. Sun Paper's gross profit margin in the third quarter was 15.87% year-on-year+1.80pct, highlighting the profitability resilience under the integration of forestry, pulp and paper.

Guojin Securities stated in a research report that some of Sun Paper's cultural paper machines have been converted to boxboard paper, enriching their product structure and relying on raw material matching and increasing the proportion of high-end products to ensure stable profitability.

According to the announcement from Sun Paper, the second phase of the 140000 ton special paper project (PM43) in the Yandian factory area of the company's Shandong base has been put into operation in January 2026; The annual production of 700000 tons of high-end packaging paper project (PM47) has been put into operation in August 2026; The supporting project of annual production of 600000 tons of bleached chemical pulp and alkali recovery has been put into operation in September 2026.

The China Paper Industry 2025 Annual Report released by the China Paper Association shows that the national production of machine-made paper and paperboard will reach 141 million tons in 2025, a year-on-year increase of 3.74%. However, the overall operating revenue of the industry was 1.42 trillion yuan, a year-on-year decrease of 2.59%, and the total profit was 44.3 billion yuan, a year-on-year decrease of 13.55%. The paper industry still faces multiple intertwined factors such as supply pressure, cost fluctuations, demand fluctuations, policy regulation, and import shocks. The industry is deeply mired in "involution" competition, and most paper mills are facing the operational dilemma of "increasing revenue without increasing profits".

From the third quarter of 2026, there is a significant profit differentiation in the paper industry, with packaging paper and specialty paper performing relatively well, while white cardboard and cultural paper are still under pressure.

For example, in terms of packaging paper and specialty paper, in the third quarter of 2026, Jingxing Paper Industry (002067. SZ) achieved a net profit of 41.94 million yuan, a year-on-year increase of 395.92%; Minfeng Special Paper (600235. SH) had a net profit of 11.05 million yuan, a year-on-year increase of 209.76%.

From the perspective of white cardboard, the industry pressure is evident. In the third quarter of 2026, Bohui Paper Industry (600966. SH) had a net profit of 20.095 million yuan, a year-on-year decrease of 36.1%; Yueyang Linzhi (600963. SH) had a net profit loss of 71.8218 million yuan, compared to a profit of 17.7698 million yuan in the same period last year, which turned from profit to loss.

According to data from the National Bureau of Statistics, from January to September 2026, the domestic paper and paper products industry generated a revenue of 1.05 trillion yuan, a year-on-year increase of 4.6%; The total profit was 28.01 billion yuan, a year-on-year increase of 15.3%.

In this context, packaging paper has become a relatively supportive type of paper in the industry structure, but the level of support may be temporary.

Zhuochuang Information analyst Xu Ling stated that the corrugated and box board paper industry is expected to perform slightly stronger in the fourth quarter than in the third quarter, supported mainly by holiday orders such as National Day and New Year's Day, domestic packaging orders driven by e-commerce promotions, and export demand for outer box paper driven by year-end Christmas and New Year stocking in Europe and America. Internal and external demand is expected to form a phased increment, providing favorable support for paper prices. However, the high inventory and stable operation of paper mills, coupled with market supply pressure, may constrain the upward trend of paper prices. It is expected that the corrugated and box board paper market will initially decline and then rise in the fourth quarter.

Chang Junting, an analyst at Zhuochuang Information, stated that looking ahead to the fourth quarter, the supply and demand pattern of coniferous pulp in the pulp end is relatively loose, and prices are under pressure; Broad leaved pulp also faces significant pressure. On the downstream side, the prices of white cardboard, cultural paper, and household paper have all shown a fluctuating downward trend, and the overall prosperity of the pulp and paper industry chain is weak, putting pressure on its operation.

(Author Wang Hui)