Altri / Ence: Great momentum ahead but in the price
We maintain our Neutral ratings but raise our FVs for Altri from Eur5.3/sh to Eur8.2/sh and for Ence from Eur5.7/sh to Eur7.9/sh as pulp prices continue to increase and are at much higher levels than we estimated at the end of 2017. We maintain our Neutral ratings on the shares as despite seeing strong earnings momentum and a still strong cycle ahead, the shares have had a strong run (in the last year both are up by 134% vs. -4% for Ibex and +10% for PSI) and the fundamental upside looks limited. The industry dynamics favour higher prices due to limited additional supply of pulp in the market, while demand continues to maintain a strong pace, and we raise our estimates accordingly. Our EBITDA goes up on average by 31% for the 2018-20E period for both Altri and Ence. In our long term assumptions we have raised pulp prices by c. 5% as we believe the changes in the industry in recent months probably justify a more disciplined industry in the future.Altri SGPS is a holding company based in Portugal. Co. is engaged in management of investments mainly in the industrial sector. Through its subsidiary companies, Co. is engaged in the production of pulp and paper through the Celbi, Celtejo and Caima Groups. Pulp is the core business of Co. and the focus is on bleached eucalyptus pulp. Co.'s three pulp mills, Celbi, Caima and Celtejo, produce over 550,000 tonnes per year. The paper mill, CPK, produces 60,000 tonnes of sack kraft paper per year. Co. manages over 78,000 ha of forest in Portugal certified by the Forest Stweardship Council.
Ence Energia Y Celulosa is engaged in the manufacture and commercialization of wood pulp and derivatives. Co. divides its activities into the following two business lines: Forest Division: Co. manages timberlands in South America and the Iberian Peninsula. Co. is involved in trading of wood, and supplies solid wood products including: plywood, sawn timber, parquet flooring and glued-edge paneling. Co. is involved in forest and environmental consulting. Pulp Division and Energy Production: Co. is engaged in the production of Eucalyptus globulus-based TCF and ECF paper pulp. Co. is also involved in the generation of electricity through biomass power producing plants.
Haitong is the first international Chinese investment bank and our goal is to be the primary channel for capital flows into and out of China. During 2015 the Senior Management Team in London was expanded significantly to focus on this objective and to provide a full-service cross-asset markets business coupled with sector-focused investment banking. We work closely with our world-wide network of offices to bring a true depth of understanding to all client situations.
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