Mayr-Melnhof confirmed at BUY, TP EUR 132 - The virtue of being defensive
Mayr-Melnhofs better than expected 4Q 19 results rounded out a record year for the group. We have repeatedly highlighted why we consider the stock an attractive long-term investment opportunity (earnings/dividend growth track record, cash generation, compelling margin/return profile), and against the backdrop of the current (financial markets) turmoil, we think that the strong balance sheet (~62% equity ratio, gearing of just ~14% even after digesting the takeover of TANN) deserves extra mentioning. Moreover, in contrast to many other businesses, even in the current Covid-19-ridden environment, the groups defensive business offers outstanding visibility (giving us at least a fair amount of confidence in our estimates). As a matter of fact, we believe that the current consumer behaviour actually creates some pent-up demand for packaging material (rising demand is also observed by Aluflexpack). With these considerations in mind we confirm the BUY rating but due to a higher equity market risk premium trim the target price to EUR 132 from EUR 138.
Mayr-Melnhof Karton and its subsidiaries are primarily engaged in manufacturing and selling cartonboard and folding cartons with a focus on Europe. Co.'s business segments include: Mayr-Melnhof Karton, which is engaged in the manufactures and markets numerous grades of cartonboard, concentrating on coated cartonboard produced predominantly from recovered paper as well as virgin fiber-based cartonboard; and Mayr-Melnhof Packaging, which is engaged in converts cartonboard into industrial printed folding cartons mainly for the food industry, other consumer goods industries, and into cigarette packaging as well as confectionary packaging.
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
The Institutional Equity Research team consists of roughly 15 analysts, both in Vienna and the CEE countries. Our analysts provide long-standing sector expertise in tandem with profound local market know how and a sectoral approach across the entire region.
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