Metsa Board (Hold, TP: EUR7.70) - Evidence of improving markets
Q4 volumes were down almost 30% YOY, and EBIT was close to breakeven – largely in line with our muted expectations. However, based on good January activity, Metsa Board guided for better volumes for containerboard and carton board, and consequently an EBIT improvement in Q1 versus Q4. We are encouraged by the new outlook statements, but have made few changes to our earnings recovery scenario for 2024–2025. We reiterate our HOLD and EUR7.7 target price.Constructive Q1 guidance. The soft Q4 earnings were largely in line with our expectation. With almost 30% lower volumes YOY, EBIT was close to breakeven (cEUR100m in Q4 2022). However, based on good January activity, Metsa Board guided for better volumes for containerboard as well as carton board, and consequently for an EBIT improvement in Q1 versus Q4.
Clear earnings improvement in sight. We are encouraged by Metsa Board’s outlook statements, but have made few changes to our positive earnings scenario for 2024–2025. Based on a c20% sequential volume improvement, we forecast Q1 EBIT of EUR33m and a gradual earnings improvement for the following quarters, driven by prices over costs as well as gradually better volumes.
HOLD and EUR7.7 target price reiterated. Metsa Board offers low-cost operations, and, longer-term, we are positive on its paperboard exposure, as we believe sustainable packaging solutions should outgrow the overall packaging market (desire to move out of plastics). Besides the theme of gradually improving containerboard and carton board markets, we like Metsa Board’s net-long exposure to pulp of more than 0.5Mt. Our target price corresponds to a 2025e EV/EBIT of c10x, compared to the 10-year average of c13x.
Metsa Board is a European producer of folding boxboard and white fresh forest fibre linerboard and a market pulp supplier. Co. and its subsidiaries comprise a forest industry group, which operations are organized into two business segments: Cartonboard and Lineboard and Paper. The Cartonboard business area is a manufacturer of folding boxboards. The business area also provides packaging services in Asia. The Linerboard and Paper business area is a manufacturer of coated white fresh forest fibre linerboards and producer of uncoated fresh forest fibre linerboards. The Linerboard and Paper business area also manufactures uncoated fine papers mainly for office end-use as well as coated papers.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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