Leading Chinese papermaker Lee & Man Paper Manufacturing Ltd. (02314.HK) issued a positive profit alert after market close on 20 July 2026, forecasting that profit for the six months ended 30 June 2026 will reach approximately HK$1.33 billion to HK$1.39 billion, representing a substantial 64%–71% increase compared with HK$811 million in the corresponding period last year.
The strong earnings guidance immediately attracted significant market attention. Since the beginning of the year, Lee & Man Paper's share price has risen 21.79%, including an 11.07% gain over the past month, significantly outperforming the broader paper products sector.
Strong Profit Growth Driven by Improved Margins
According to the company, the substantial increase in earnings was primarily driven by a significant improvement in profit margins. The margin expansion reflects meaningful progress in cost control, product pricing, and product mix optimization, achievements that are particularly noteworthy amid continued volatility in raw material prices and persistent pressure from rising energy costs.
From a business segment perspective, the company's full-year 2025 results showed that:
- Packaging paper generated revenue of HK$20.178 billion, up 0.4% year on year.
- Tissue paper revenue increased 15.1% year on year to HK$6.017 billion, making it the company's fastest-growing business segment.
- Pulp revenue declined 32.6% year on year to HK$447 million.
The rapid growth of the tissue paper business is closely linked to Lee & Man Paper's continued capacity expansion in the household tissue sector over recent years.
For comparison, the company's interim net profit for the first half of 2025 amounted to HK$811 million, representing only 6.7% year-on-year growth. By contrast, the expected profit growth for the first half of 2026 has accelerated sharply to 64%–71%, demonstrating a significant improvement in the company's earnings capability within just one year.
Major Project Pipeline Advances on Multiple Fronts, Accelerating Capacity Expansion
Alongside its significant improvement in profitability, Lee & Man Paper made substantial progress on several major strategic projects during the first half of 2026, laying a solid foundation for the company's long-term growth.
Integrated Forestry–Pulp–Paper Project in Guigang, Guangxi
This project represents Lee & Man Paper's second major production base in Guangxi and involves a planned total investment of RMB 27.5 billion, to be developed in two phases.
- Phase I, with an investment of approximately RMB 10 billion, is designed to produce 1 million tonnes of bleached chemical pulp and 800,000 tonnes of premium tissue paper and related products annually.
- Phase II, with an investment of RMB 17.5 billion, will focus on manufacturing high-performance Lyocell fiber and downstream products using bio-based feedstocks, targeting the growing market for biodegradable, high-value advanced materials.
As of June 2026, equipment installation for Phase I commenced in May, with full completion and commercial operation expected by mid-2027. Selected tissue production lines are targeted to begin operation by the end of 2026, enabling early revenue generation. Once fully operational, Phase I is expected to generate approximately RMB 10 billion in annual output value and create 3,000–5,000 jobs.
Bamboo Pulp & Paper Integrated Project in Sichuan Province
The first-phase land parcel has been successfully transferred, while land acquisition and site clearance for Phase II have been completed. Regulatory and compliance approvals for the industrial park have also achieved significant progress.
New Materials Project in Chongqing City
The company plans to establish an integrated green materials production base with a total annual capacity of 1.1 million tonnes, to be developed in two phases:
- Phase I: Annual production capacity of 500,000 tonnes of bamboo pulp and 300,000 tonnes of premium tissue base paper.
- Phase II: Annual production capacity of 300,000 tonnes of food-grade packaging paper.
Phase I is expected to be completed during the second half of 2026.
The Production Base in Chongzuo, Guangxi
The first phase of the Chongzuo project commenced commercial operation in 2023, with an annual production capacity of 600,000 tonnes of pulp and paper products and an annual output value of approximately RMB 2.8 billion. The company is currently advancing land-use planning adjustments for Phase II.
Technology Upgrade Project in Guangdong Province
Lee & Man Paper plans to invest RMB 520 million in constructing a 400,000-tonne-per-year wood fiber production line, replacing recovered paper with high-quality virgin wood fiber in packaging paper production to further improve product quality and operational efficiency.
Expanding Overseas Footprint
Internationally, the Group will continue strengthening the regional role of its Southeast Asian manufacturing base. Its Vietnam operations retain considerable room for expanding containerboard and corrugated medium production capacity.
Meanwhile, affiliated company Lee & Man Chemical (0746.HK) plans to establish its first overseas manufacturing facility in Vietnam, with trial production expected to commence by the end of 2027.
Positive Outlook Supported by Margin Expansion
Lee & Man Paper's positive profit alert sends a clear and encouraging signal to the market. Continued improvement in operating margins remains the primary driver of earnings growth. Whether this momentum can be sustained will largely depend on several key factors, including:
- Trends in raw material costs, particularly recovered paper and pulp prices;
- The pace of recovery in downstream demand for packaging and tissue paper products;
- The timing and efficiency of capacity ramp-up as the company's major projects come into operation.
Looking Ahead
Several large-scale projects, each involving investments exceeding RMB 10 billion, are scheduled to enter commercial operation during 2027. Their commissioning is expected to significantly expand Lee & Man Paper's production capacity and revenue base, supporting the company's next phase of growth.
Investors should closely monitor the company's official interim results announcement, expected to be released before the end of August 2026, for more comprehensive financial data and detailed segment performance.
