Although the price of pulp has declined, it has not been reflected in the performance of paper companies.

On July 20th, Vinda International (03331.HK) released the 2023 China report. During the reporting period, it achieved revenue of HK $10.07 billion, up 10.1 per cent year-on-year and 4 per cent year-on-year in Hong Kong dollars. It recorded a net profit of HK $121 million, a sharp decrease of 81.1 per cent year-on-year, while the net interest rate fell 5.4 percentage points to 1.2 per cent.

On the day of the release of the results, Vinda International opened low, hitting an intraday low of 17.76 Hong Kong dollars per share for the year, and closed at 18 Hong Kong dollars per share, down 1.32 percent.

Vader International attributed to profit pressure caused by cost inflation pressure, and said that although wood pulp prices gradually fell at the end of 2022, costs in the first half of this year were still affected by past high-price inventories, putting pressure on gross profit margin, which fell 6.9 percentage points to 25.1% during the reporting period.

In the same trade, the China News notice of Shun Jie Rou (002511.SZ) shows a similar situation.

In the first half of 2023, Zhongshun Jierou expects net profit to fall by 55% to 65% year-on-year, also due to high pulp stocks and rising energy prices.

Since the beginning of this year, the main price of pulp futures has fallen from more than 6000 yuan / ton to about 5200 yuan / ton.

By channel, Vinda International's revenue from traditional dealers, modern channel supermarket hypermarkets, commercial and e-commerce accounts for 24%, 21%, 9% and 46% of the total revenue, respectively. Among them, the revenue of e-commerce channel increased most significantly, recording a natural growth of 23.6%. According to the Shengang Securities Research report, Vida International has firmly occupied the first place in the market share of the major e-commerce platforms since 2015, while covering overseas channels with personal care products.

By product, the tissue business, which accounts for more than 80% of the total revenue, is the core business of Vader International. Revenue contributed HK $8.361 billion during the reporting period, up 5 per cent from a year earlier, but gross profit margin fell sharply from 31.6 per cent to 23.8 per cent.

Vinda International mentioned the double-digit growth in sales of its high-end paper portfolio in mainland China during the reporting period.

Another part of Vader's personal care business with higher gross margins was less affected by costs, with revenues of HK $1.708 billion during the reporting period, down 0.5 per cent from a year earlier and accounting for 17 per cent of total revenue, compared with paper towels. Gross profit margin decreased by only 2.9 percentage points to 31.2%.

The reason is that the sanitary napkins in personal care products have the characteristics of high gross profit and low consumer price sensitivity.

According to the Southwest Securities Research report, in line with the trend of upgrading consumption, the proportion of middle and high-end sanitary napkins products in the industry continues to increase. The market share of the seven-dimensional space under the industry leader Hengan Internationgal Group has reached 16.1%, ranking first in the industry. The unit price of new sanitary napkins is more than 1 yuan per piece.

In terms of performance outlook, Vinda International said it would invest in high-end and high-margin categories, continue to invest in personal care, e-commerce and new channels.