[Asia Economy Reporter Hyungsoo Park] Online shopping is increasing due to the spread of the novel coronavirus infection (COVID-19). As the demand for white cardboard used as internal packaging material rises, companies such as Hansol Paper, Seha, and KleanNara are expected to see improved performance.
DB Financial Investment stated on the 10th that as online shopping transaction amounts increase, the consumption of white cardboard also rises, forecasting that the growth rate of the white cardboard industry will accelerate in the future.
Yu Kyung-ha, a researcher at DB Financial Investment, explained, "The demand for white cardboard is increasing with the rise in online shopping transaction amounts and the spread of small packaging trends," adding, "The main sectors using white cardboard in online shopping are food, agricultural and marine products, daily necessities, cosmetics, and food services."
He continued, "Over the past three years, the annual average transaction growth rate in these five sectors has exceeded 30%," adding, "The increase in small packaging products responding to the spread of single-person households and the improvement of income levels in key export regions such as Southeast Asia are also positively impacting domestic and international white cardboard demand."
He also emphasized, "Paper mills in Korea have been imprinted on local communities as nuisance facilities causing environmental pollution," adding, "It is difficult to obtain local government approval and resident consent for establishing or expanding factories."
Since demand is increasing but expansion capacity is decreasing, an environment favorable to existing producers is being created.
Researcher Yu analyzed Hansol Paper, stating, "Despite achieving the best performance since the corporate split in 2015, the stock price remains at a price-to-earnings ratio (PER) of about 4 times based on this year's expected performance," and added, "It is possible to achieve operating profit exceeding 120 billion KRW and controlling shareholder net profit in the 80 billion KRW range this year."
He also emphasized, "Seha, having been incorporated into the Haesung Group, can reduce raw material costs through integrated raw material purchasing," forecasting, "The cost reduction effect is expected to reach 2 to 3 billion KRW annually." Furthermore, he noted, "Sharing sales channels with Korea Paper, which has a large business scale, and expanding customers is also a positive factor," and said, "They are dreaming of a Sonoco business model that directly develops and supplies packaging materials needed by customers."
Researcher Yu explained, "KleanNara's consolidated operating profit this year is estimated to be around 60 billion KRW," adding, "Operating cash flow is rapidly improving, so there will be no difficulties in principal and interest repayments."
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