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DHC - New capacity, paper market disruption to kick-start growth - Company Report

We expect 2017 EPS to fall 27% YoY due to a 24% dilution from new issuance to finance capex and an 11% slide in NPAT following 2.5 ppt GPM compression. However, we forecast 126% 2018 EPS growth as Chinese manufacturers reduce production due to new environmental regulations. DHC’s new factory should start operations in mid-2018, increasing kraft paper capacity by 3.5x and contributing 70 ppts to NPAT growth in 2018.