UPM (Buy, TP: EUR43.00) - Earnings growth still on track
Following the profit warning, we have lowered our 2023e EBITDA by 7% and our 2024e by 2%. The weaker pulp prices (bottom of the cycle levels) and overall depressed deliveries will hurt earnings in Q2e and (to some extent) in Q3e. Still, after the summer, we expect pulp prices and the key markets to normalise. This, in combination with ‘self-help’ (transformative growth investments) should increase 2024e EPS to EUR4.4, translating into a P/E of below 7x. We reiterate our BUY but have cut our target price to EUR43 (45).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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