UPM (Buy, TP: EUR45.00) - Fit for buybacks
UPM is set to reap the benefits of five years of investing heavily, while hitting the pause button on capex in 2025–2026e. Thus, we forecast strong free cash flow, leaving UPM debt-free by 2026, paving the way for much-increased, value-accretive shareholder cash allocations. Assuming UPM took full advantage of its mandate and bought back 9.4% of its shares at a c10% premium, we calculate 2025e NIBD/EBITDA would be c0.9x, well below its <2x target. UPM remains our sector top pick, and we reiterate our BUY and EUR45 target price.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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