2016 Results Preview: Upgrade from Hold to Buy
Trading conditions deteriorated in the first nine months, to improve in the final quarter. We expect 4Q results to improve from the last two quarters as pulp sales recover and pricing edges up. Energy hedging should delay benefiting from higher 4Q16 pricing until 2017.
For the year 2016 we are forecasting a +4% increase in pulp volumes sold, –4% for biomass generation, a –12% decline in sales, –33% in adjusted EBITDA, –48% in EBIT and –13% for the net profit.
The outlook for 2017e is far more solid with higher pulp and energy prices, reined-in costs, favourable regulation for biomass, and added biomass capacity that leads us to revise upward our forecasts, increase our target price from €2.76 to €3.00 and upgrade our recommendation from Hold to Buy.
Ence Energia Y Celulosa is engaged in the manufacture and commercialization of wood pulp and derivatives. Co. divides its activities into the following two business lines: Forest Division: Co. manages timberlands in South America and the Iberian Peninsula. Co. is involved in trading of wood, and supplies solid wood products including: plywood, sawn timber, parquet flooring and glued-edge paneling. Co. is involved in forest and environmental consulting. Pulp Division and Energy Production: Co. is engaged in the production of Eucalyptus globulus-based TCF and ECF paper pulp. Co. is also involved in the generation of electricity through biomass power producing plants.
Bankinter S.A. is a Spanish brokerage firm established in 1989. The company's line of business includes the provision of market research and trading services for Equity and Fixed Income products.
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