September: Pulp shipments -10% y-o-y

UPM (Buy, TP: EUR42.00) - Earnings growth and buybacks

Since UPM had pre-released Q3 EBIT and provided new Q4 guidance, the Q3 report included no real surprises. Still, we are encouraged by UPM’s focus on continuously reducing fixed costs. Based on improved volumes in combination with better prices for pulp and biofuels, we are confident UPM will show impressive earnings growth. Based on reduced 2025–2027e capex, we also expect strong free cash flow, leaving the balance sheet overcapitalised, and paving the way for buybacks on top of compelling dividends. We reiterate our BUY and EUR42 target price.

Pulp is down and Wood is up

The weekly navigator

From the past week, we highlight: 1) Kinnevik seeks a buyback mandate and proposes two new board members ahead of its EGM; 2) we met VEF’s and Creditas’ CEOs in Stockholm; and 3) Flerie is set to present at our Healthcare Conference in Oslo next week.

Star Bulk (Hold, TP: USD20.20) - Coming challenges mostly priced in

We still see downward pressure on rates and asset values due to the imbalance between China’s underlying raw materials demand and its imports. On our 2025e spot rates and historical valuation multiples, we see 23% downside risk to current 5-year-old Capesize values, and even more for its Supramaxes. Still, we find the share price should be covered even in the event of a 25% drop in asset values. Hence, we have upgraded to HOLD (SELL) and raised our target price to USD20.2 (19.3).

Subsea 7 (Buy, TP: NOK260.00) - All eyes on 2025 guidance

We are in line with consensus on Q3e adj. EBITDA and expect 2025 revenue guidance to be the key focus (margin guidance already provided). Our 2025e revenue of USD7.1bn is in line with consensus, with YOY growth supported by an already-secured backlog (69% backlog coverage versus 55% historically), higher dayrates for its PLSVs, and two new fleet additions in 2025. We reiterate our BUY and NOK260 target price.