UPM (Buy, TP: EUR42.00) - Still fit for growth and buybacks
Although we were surprised and disappointed by UPM’s 2024 profit warning, we remain confident that it will report strong earnings growth for 2025–2026. With incrementally higher profits from the new business in Uruguay and low 2025–2026e capex, we also expect strong free cash flow, leaving the balance sheet overcapitalised with 2025–2026e NIBD/EBITDA of 0.5–0.1x, paving the way for much-increased, value-accretive shareholder cash allocations. We reiterate our BUY but have cut our target price to EUR42 (45), reflecting 18%–7% lower 2024–2025e EBITDA.UPM-Kymmene is a global paper and forest products group, mainly engaged in the production of paper, with an emphasis on the manufacture and sale of printing and writing papers. Co.'s operations comprise of these segments: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Paper Asia, UPM Paper ENA, UPM Plywood and Other. UPM Biocomposites, UPM Biochemicals business units and Group services are reported in Other operations. Co.'s activities are centred in European Union countries, North and South America and Asia with production plants in 13 countries.
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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