- We cut our target price (TP) by 5% and downgrade our rating from BUY to OUTPERFORM. In this update, we roll our TP horizon forward to mid-2025.

- We lower 2024F/25F/26F NPAT-MI by 23%/13%/8%, respectively, mainly driven by a lower GPM assumption. We expect for 2024F GPM to compress vs in 2023 before picking up from 2025, due to (1) a slower-than-expected recovery in paper prices while (2) input costs increase, driven by a stronger-than-expected hike in old corrugated containers (OCC) prices. However, we expect that the negative impact of GPM compression caused by a lower input-output spread on NPAT-MI will be partly offset by our higher forecasts for carton box sales volume.

- Our target price implies respective 2024F/25F P/Es of 12.4x/9.4x vs a 10-year average TTM P/E of 10.5x. We believe DHC deserves valuation multiples that are at least equivalent to its historical average during the expected upcoming earnings recovery.

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