EUR 90.92 For Business Accounts Only

Metsa Board (Buy, TP: EUR9.00) - Earnings recovery story for 2025e

With recent indications that the paper board demand recovery is slowing in H224, in combination with higher wood costs and weak trading conditions for pulp, we have further lowered our 2024–2025e EBITDA by 11–12%. While this is negative, we still like the investment case. Assuming improved pulp prices and incremental profits after completed investments, we see strong earnings growth from Q1 2025e, translating into attractive valuation multiples, and a healthy balance sheet. We reiterate our BUY, but have lowered our target price to EUR9 (10). Q3e impacted by tough trading conditions. On weak pulp volumes and high wood costs for Metsa Fibre, as well as low capacity utilisation for board products (we estimate <80% for Q3), we expect relatively weak Q3 earnings (due at 11:00 CET on 24 October), but believe this should mark the earnings cycle trough. We forecast Q3 EBIT of EUR46m and Q4 EBIT of EUR74m. 2024–2025e EBITDA cut on volumes and wood costs. With recent indications that the demand recovery is slowing in H224, in combination with higher wood costs and weak trading conditions for pulp, we have further lowered our 2024–2025e EBITDA by c11–12%. While this is negative, we still like the investment story, as we expect strong earnings growth from Q1 2025e. BUY reiterated, but target price cut to EUR9. Given its strong position in a growing paperboard market and good links to the Metsä Group, we believe Metsa Board has a major advantage in sourcing wood at competitive prices. On our forecasts for 2025–2026, the stock is valued at low P/Es of c7–6x, which we believe reflects investor concerns about over-the-cycle earnings and capital allocation in the coming years. However, we are not concerned about future capex, and given its favourable position and solid balance sheet, we see scope for a revaluation. Our new target price corresponds to a 2025–2026e P/E of c10x, compared with the 10-year average of 16x.