Metsa Board (Buy, TP: EUR11.00) - Scope for a revaluation

With ample evidence of improved demand for paper board and a better price outlook for market pulp, we believe earnings headwind has now turned into a tailwind. We also expect earnings to be driven by incremental volumes after capacity expansions at existing mills. After ambitious investments over the past three years, the company’s paper board capacity is up c25%, while its net long pulp position has increased by close to 30%. We have upgraded to BUY (HOLD) and raised our target price to EUR11 (...

April sales: +2.8 comparable (positive calendar)

March: Pulp shipments +8% y-o-y

Paradox Interactive (Buy, TP: SEK260.00) - Good entry point on negativ...

Q1 marked a soft start to 2024, which together with the recent negative news flow (game delays, technical issues in Cities: Skylines 2) has created a good entry point in the sector’s quality name. We are confident in the long-term profitability of the core portfolio, and like the optionality from new games like ‘Life by You’, set for release in Q2. We reiterate our BUY, but have trimmed our target price to SEK260 (270) on 7–5% lower 2024–2025e EBIT.

One step forward, two steps back

Q1: 9% beat, but Kemi shutdown to weigh on Q2. Early-cyclicals improve, late-cyclicals to follow. Kemi and Husum projects could add >50% to EBIT. HOLD.

Metsa Board (Hold, TP: EUR7.70) - Positive start to 2024

The Q1 results were largely in line with our expectations, and the long-lasting market headwind finally turned into a tailwind, enabling paper shipments to rise 20% QOQ. However, while we expect market conditions to remain fairly healthy in 2024 and beyond, Metsa Board looks unlikely to reap the benefits due to interruptions at the Kemi flagship mill during Q2. With favourable business exposure to packing and pulp, we reiterate our HOLD and EUR7.70 target price.

Brighter beyond Q2

Q1'24 EBIT 6% below our expectations, driven by BTT. Soft short-term outlook but brighter beyond Q2'24e. '24e-'26e down 4-3%, TP cut to EUR 17.5 (18.5), HOLD.

Good value, but lacking positive triggers

Near-term outlook still muted (tough comps high cons.) but long-term sector winner with 25% EPS CAGR '23-'26e. Reiterate BUY, TP of SEK 200 (210); 13-11x EV/EBITDAC '25e-'26e.

Kesko (Hold, TP: EUR17.00) - Technical(ly) weak

Q1 disappointed due to Building & Technical Trade (BTT) profitability well below expectations. We continue to see a mixed case, with stable to gradually improving Grocery Trade (GT) but still-weak Building & Technical Trade. We reiterate our HOLD but have cut our target price to EUR17 (18), after lowering our 2024–2026e clean EBIT and DPS by c4%.

A tad softer growth and profitability in Q1

Soft Q1 results

Metsa Board (Hold, TP: EUR7.70) - Underlying earnings set to rise

With rising pulp prices alongside evidence of more normal conditions for the paper business, we are convinced that Metsa Board will show much stronger earnings compared to 2023, which represented a cyclical low point. However, in the short term, H1 earnings are set to be affected from the Finnish strike and long-term interruption at the Kemi mill, something that is likely to linger on the share price. We reiterate our HOLD and our target price of EUR7.7.

Paradox Interactive (Buy, TP: SEK270.00) - Focusing on Q2 releases

Q1 was fairly average for DLC and new releases, with ‘Cities: Skylines 2’ (CS2) DLC not enough to drive a resurgence in player activity. We have cut our 2024e EBIT by ~5% to reflect our lower near-term CS2 sales expectations, but remain confident Paradox will report strong earnings growth in 2024. We reiterate our BUY but have lowered our target price to SEK270 (280) ahead of the Q1 report, due at 08:00 CET on 25 April.

Kesko (Hold, TP: EUR18.00) - Remaining on the sidelines

While we believe Kesko has continued to show good resilience in a challenging cycle, we are c3.5% below consensus on Q1e clean EBIT. Our focus in the report will be on divisional operating margins and any outlook commentary. We remain muted on the stock due to the uncertainty in the Nordic construction sector, coupled with a sluggish consumer outlook. We reiterate our HOLD, but have cut our target price to EUR18 (19).

Metsa Board (Hold, TP: EUR7.70) - Evidence of improving markets

Q4 volumes were down almost 30% YOY, and EBIT was close to breakeven – largely in line with our muted expectations. However, based on good January activity, Metsa Board guided for better volumes for containerboard and carton board, and consequently an EBIT improvement in Q1 versus Q4. We are encouraged by the new outlook statements, but have made few changes to our earnings recovery scenario for 2024–2025. We reiterate our HOLD and EUR7.7 target price. Constructive Q1 guidance. The soft Q4 earn...

Paradox Interactive (Buy, TP: SEK280.00) - Set for strong 2024e earnin...

We reiterate our BUY and SEK280 target price following Q4’s strong top line but earnings hampered by the pre-announced SEK171m writedown of ‘Lamplighters League’. We have raised our 2024e sales by 5% and EBIT by 2%, with FX gains slightly offset by lower gross margin expectations. Continued ‘Cities: Skylines 2’ sales and multiple new releases in 2024e drive our forecast EBITDA growth of 25% YOY.

Kesko (Hold, TP: EUR19.00) - Grocery gains

The Q4 results included a c4% clean EBIT beat, primarily on Grocery Trade strength (flat margins YOY). The muted outlook and 2024 guidance were as expected, limiting the excitement in our view. We reiterate our HOLD on limited estimate changes, but have raised our target price to EUR19 (18).

Metsa Board (Hold, TP: EUR7.70) - Worst should be over

With rising pulp prices alongside indications of more normal business conditions for the paper board business, we continue to see good support for gradually improved earnings throughout 2024e. Still, near-term, we believe management will guide for only slightly better market conditions in Q1. Although we have reduced our 2024e earnings, we have slightly increased our target price to EUR7.7 (7.5), as we believe higher pulp prices in H1 are likely to support sentiment on the stock. We reiterate ou...

Kesko (Hold, TP: EUR18.00) - Focus on 2024 outlook

We believe focus in the Q4 report will be on 2024 market outlook comments and group guidance (we expect lower earnings YOY and prolonged market weakness). Our 2024–2025 earnings estimates are slightly above consensus (which has likely yet to reflect recent M&A). We reiterate our HOLD, but have raised our target price to EUR18.0 (16.5).

Paradox Interactive (Buy, TP: SEK280.00) - Strong potential in 2024e

We expect strong Q4 revenue, with the release of ‘Cities: Skylines 2’ (CS2) for PC and numerous DLCs, but with earnings hampered by the writedown of ‘Lamplighters League’. We have cut our Q4e EBIT on the somewhat underwhelming start to CS2, and reduced our 2024e EBIT by 5% mainly to reflect FX movements. We maintain our BUY, but have slightly lowered our target price to SEK280 (285).