LM’s recent px hikes more than offset increased costs from 25% OCC tariff
RPB a cheap alterative to US OCC. Coal-to-gas to push out small mills
Reiterate OP – more price hikes/shutdowns soon, cheap valuation
12-month price target: HK$9.50 based on a Price to Book methodology.
Catalyst: 1) price hikes in late Aug; 2) environmental checks from Aug
Action and recommendation
Reiterate OP – We believe LM has oversold (-15% in past week) on the 25% US OCC tariff news. LM trading at just 5.5x 19E PE (LT ave. 8x), 22% ROE, 6% div yield. Mgmt share buyback could provide downside support.