Citi Research has released a report raising its target price for Lee & Man Paper Manufacturing Ltd (02314.HK) from HK$4.80 to HK$5.50. The new target is based on a 9x 2026 price-to-earnings ratio, consistent with historical averages, reflecting an outlook for better-than-expected profitability in tissue paper, supported by a projected 15% compound annual earnings per share growth rate through 2028.

The firm reaffirms a "Buy" rating for Lee & Man Paper while maintaining a "Neutral" rating for Nine Dragons Paper (Holdings) Ltd (02689.HK). Due to the improved earnings outlook for its tissue paper segment, Citi has added Lee & Man Paper to its China Small-Mid Cap Top Picks list.

Lee & Man Paper reported its first-half results, with net profit surging 70.5% year-on-year to HK$1.383 billion, landing at the high end of its prior guidance range of HK$1.33 billion to HK$1.39 billion. Citi maintains its 2026 earnings forecast unchanged but has raised its 2027 to 2028 earnings projections by 1% to 3%, following the company's announcement to expand its Guangxi tissue paper capacity by 300,000 tonnes starting in August 2027, bringing total capacity to 1.5 million tonnes—a 25% increase. The current-year earnings forecast remains unchanged.