1Q26 Results: Earnings Continued to Improve, Above Ours and Consensus
NKP delivered a relatively solid 1Q26 performance, with revenue reaching USD 816 mn (+1.0% QoQ; +4.3% YoY). Results were mainly supported by stable pulp turnover and better industrial paper contribution, extending FY25 momentum as pulp sales volume reached 2 Mt (+8.1% YoY) while industrial paper output rose to 2 Mt (+10.2% YoY). This adjusted 3M26 revenue broadly in line with our estimate (22.7%), albeit slightly below consensus (20.2%). Operationally, profitability remained robust, with gross profit at USD 282 mn (–0.1% QoQ; +20.6% YoY), implying GPM of 34.5% (+4.7 ppt YoY) and supported by stable pricing / sharper cost efficiency. EBIT stood at USD 197 mn (–2.9% QoQ; +42.1% YoY), while EBITDA reached USD 257 mn (–0.8% QoQ; +33.5% YoY), reflecting solid operating leverage, despite slightly higher opex. Consequently, 3M26 EBIT matched 26.7% of our estimate and 24.2% of consensus, indicating stronger-than-expected operational delivery. On the bottom line, net profit rose to USD 156 mn (+22.5% QoQ; +11.4% YoY), supported by stronger operational performance despite higher net interest expense. This delivered 3M26 net profit above our estimate (36.1%) and cons. (32.2%).

Pulp Market Finds Floor as Global Supply Tightens
Coming into 6M26, pulp and paper market shows signs of stabilization, following 4Q25 BSK price bottoming at USD 698/t. prices are gradually recovering, marking USD 750/t as of 4M26, thus reflecting improved demand. Recovery was supported by stronger BSK pull from China, rising to 757 Kt (+8.2% YoY), above the normal level of c.700 Kt, despite softer global shipment trends. Overall, pulp shipments remained relatively solid at 4.5 Mt (–8.0% QoQ; –5.9% YoY), with China accounting for c.41% of global demand, reaching 1.7 Mt (–8.0% QoQ; –2.8% YoY). BHK demand remains resilient at c.42 Mt and is expected to gradually rise to c.45 Mt, with China contributing c.18.8 Mt (~44% of global demand). Over the longer term, global market pulp demand is expanding to 69.6 Mt in 2025 (from 57 Mt in 2015), indicating sustained structural growth. Downstream, 2030F pulp and paper consumption is projected to reach c.460 Mt (vs. 437 Mt in 2025), with containerboard accounting for c.51% of the mix, reinforcing demand visibility across packaging segments. In addition, constrained naphtha supply amid Middle East disruptions may drive substitution toward paper-based packaging, supporting incremental pulp demand. Looking ahead, pulp prices are expected to remain firm through 2026, with BSK projected at USD 775/t (+5.0% YoY), while Mar-26 China’s BHK price increased to USD 603/t (Dec-25: USD 557/t), supported by tightening supply amid geopolitical risks. Potential downtime from Suzano (c.12.4 Mt, +30% YoY) implies c.3 Mt of effective supply loss, further compounded by Indonesia’s forestry permit revocations affecting >20 companies, removing c.2 Mt of pulp (4% of global BHK supply). Collectively, these factors reinforce a structurally tighter market balance.

Forecast Revisions on Firmer Pulp Outlook
Given the above developments, we revise our financial projections upward, supported by expectations of higher sales volume at 5.9 Mt (+9.5% YoY), mainly driven by stronger industrial paper performance at 2.5 Mt (+24.8% YoY); this reflects a contribution from the new factory expected to commence production in 2H26. Our numbers are further supported by firmer pulp price assumptions, with BHK prices in China rising 8.3% since Dec-25 to USD 603/t as of Mar 26, indicating improving demand momentum. Consequently, we raise our 2026F revenue forecast to USD 3.7 bn (+1.5% vs. previous; +15.2% YoY) and adjust 2027F revenue to USD 4.0 bn (–3.7% vs. previous; +8.6% YoY). On the bottom line, we also revise earnings upward, with 2026F net profit projected at USD 545 mn (+17.8% vs. a previous +12.6% YoY) and 2027F net profit at USD 575 mn (+1.8% vs. a prev. +12.7% YoY).

Maintain BUY with Higher TP of IDR 11,700/sh
Valuation-wise, we maintain our BUY call on INKP, supported by its still-undemanding valuation, while raising our TP to IDR 11,700/sh (from IDR 8,700/sh), implying FY26F P/E of 7.4x (+1 SD above its 3-year average) and offering c.20% upside potential. Key risks remain: softer global pulp demand, macroeconomic volatility and ongoing uncertainty surrounding global tariff dynamics. 1Q26 Results: Earnings Continued to Improve, Above Ours and Consensus Pulp Market Finds Floor as Global Supply Tightens

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