Lee & Man Paper Manufacturing (HKG:2314) recorded a year-on-year decrease of 27% in net profit for financial year 2012, in line with HSBC Global Research's expectations. The brokerage said that management of the company remains cautious on the outlook, but the brokerage believes market situation should start improving from 2013 onwards.

The brokerage maintained its Neutral rating for the stock and cut target price by 3% to HK$3.6

The brokerage pointed out that management remains cautious on the outlook for the coming 6-12 months as macroeconomic uncertainty will likely continue to have a negative impact on container board demand. Net margin per ton of the company dropped by 28% to HK$363 per ton in financial year 2012 and due to oversupply in the industry, the brokerage didn't see a sharp recovery in margin any time soon and believed margins are likely to stay at the current level for the next six months.

The brokerage expected net profit of the company to increase 25% in financial year 2013, being HK$1.691 billion and earning per share to be HK$0.36.