Mayr-Melnhof confirmed at HOLD, TP EUR 154 - Model update post overall in-line 3Q results
In 3Q, MM Group delivered a sound underlying earnings performance that matched our expectations overall but we did not spot fresh catalysts. Consequently, we confirm the HOLD recommendation for Mayr-Melnhof and due to marginally higher forecasts adjust the target price to EUR 154 from EUR 150. Order books seem to have normalised (was flagged in 2Q esp. for MM Karton) from elevated levels earlier in the year, but given customer supply chains at around normal levels, we assume resilient trading conditions to persist in both divisions. As regards recovered paper prices the group envisages rising volatility (but no material headwinds), which above all is due to the impact of lockdowns/containment measures on collection volumes. While the profitability of MM Karton should remain at compelling levels for the time being, we think that the record hunt that was ignited by a sharp and prolonged deflation of recovered paper prices should pause for now (1H clean margin of 14.4% represents a punchy comparison base next year). The profitability uptick recently observed in MM Packaging should counteract. Further (but smaller) one-off charges might be booked in 4Q. The valuation of the share remains undemanding (both FY 21-22e P/Es and EV/EBITDA in line with historical medians) and the group’s cash conversion (FCF yield of approx. 6%) is comforting, in our view.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.
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