Broker tips: Mondi, Smurfit Kappa, Smiths Group

by | Jul 6, 2023

(Sharecast News) – JPMorgan Cazenove upgraded packaging and paper firms Smurfit Kappa and Mondi on Thursday to ‘overweight’ from ‘neutral’ and kept DS Smith at ‘overweight’.
The bank noted that all three have seen their share prices decline by 15% year-to-date on market concerns over lower prices, de-stocking and general macro woes.

“In our view, testliner prices are at/close to the bottom as costs are starting to support prices (implies box prices bottom in H2 2023),” it said. “The timing and quantum of the destocking cycle continues to be a risk, but we think that de-stocking (circa 4-5% of current demand weakness) should improve in H2 23.

“We do not factor in a sharp recovery in prices due to ample supply but we think bottoming prices should see earnings trough in FY24e.”

JPM said that considering that all companies are trading at trough multiples on trough earnings, it thinks that these risks are reflected in the price, hence the two upgrades and keeping DS smith at OW.

“We prefer Smurfit Kappa over DS Smith on its lower gearing and better FCFF profile, while we think Mondi represents longer-term value, expected headwinds in the UFP and Flexible Packaging divisions as well as the continued Russia overhang could delay value realisation.”

JPM cut its price target for Mondi to 1,355p from 1,606p and for Smurfit to 3,100p from 3,400p.

RBC Capital Markets upgraded Smith Group to ‘sector perform’ from ‘underperform’ and lifted the price target.

“Underperformance of around 20% over the last nine months means that the relative valuation of Smiths has moved from a significant sector premium to now a slight discount,” it said.

“With higher peer multiples supporting our sum-of-the-part rising to 1,775p (from 1,650p) we upgrade our rating.”

Related articles

RBC Capital cuts Rentokil price target

RBC Capital cuts Rentokil price target

(Sharecast News) - RBC Capital Markets cut its price target on Rentokil Initial on Wednesday to 575p from 610p as it downgraded forecasts for forex and a greater back-end loading of TMX synergies, but said it believes the long-term story remains intact. The bank said...

Citi stays cautious about Experian on falling US credit flows

Citi stays cautious about Experian on falling US credit flows

(Sharecast News) - Citi has lifted its target price for data analytics and consumer credit reporting group Experian after a near-30% jump in the stock in the past two months, but has maintained a 'neutral' rating on the stock. Citi said back in August that while US...

Trending stories

Join our mailing list

Subscribe to our mailing list to receive regular updates!