We raise our forecasts in light of strong performance in Q1

Research evidence excerpt

Global Markets Research

Rengo

18 August 2026

3941.T 3941 JP / EQUITY: JAPAN PAPER & PULP

We raise our forecasts in light of strong

performance in Q1

Rating

Remains

We expect profit growth to be driven by smaller losses overseas and

improved margins on cardboard and flexible packaging

Increased from JPY

Buy

Target price

JPY 1,790

1,690

We raise operating profit forecasts on strong performance in Q1, reiterate Buy

rating

Rengo generated strong operating profits in 27/3 Q1, but we only nudge up our operating

profit forecasts for 27/3 onwards as we think Q1 profits were flattered somewhat by

frontloaded demand and inventory effects related to product price hikes. We expect

medium-term earnings growth to be driven by smaller losses overseas and improved

margins on cardboard and flexible packaging. Assuming the current raw material and fuel

environment persists, we would expect the next round of cardboard price hikes to be in

28/3. We raise our target price to ¥1,790, which we continue to obtain by multiplying our

28/3 EPS forecast by a P/E of around 12x, a 30% discount to the Russell/Nomura Large

Cap (ex financials) average of around 17x.

We forecast operating profit growth of 32% in 27/3, after unusually high Q1 profits

We raise our 27/3 operating profit forecast from ¥44.5bn to ¥48.9bn (up 32% y-y) versus

guidance of ¥46.0bn to reflect strong performance in flexible packaging and paperboard &

paper processing in Q1. The company booked around ¥2.0bn in inventory valuation gains

as it hiked prices for flexible packaging in April at the same time that raw materials

remained inexpensive, and sales volumes were also unusually high in Q1 as a result of

stockpiling in response to the conflict in the Middle East and frontloaded demand ahead of

price hikes. While immediate inventory rundowns look unlikely as risks in the Middle East

have yet to be dispelled, we nonetheless take a more cautious view of sales volumes from

Q2 onwards. We expect profits in the paperboard & paper processing segment to rise

slightly y-y thanks to price hikes for cardboard implemented since 2025. Overseas

margins have been improving on fixed cost savings and impairments in 26/3, but demand

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