SCA (Buy, TP: SEK185.00) - From headwinds to tailwinds

We have made relatively small but positive revisions to our 2024–2025e earnings, which remain well above consensus. We continue to see plenty of value in SCA, as well as a good risk/reward, with evidence of better pulp markets and signs of improved pricing for the containerboard business and completed large investments generating significant incremental earnings for 2024–2025e. We reiterate our BUY but have raised our target price to SEK185 (180).

Svenska Cellulosa AB SCA: 1 director

A director at Svenska Cellulosa AB SCA bought 1,800,000 shares at 141.700SEK and the significance rating of the trade was 100/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors over the last t...

SCA (Buy, TP: SEK180.00) - Buying opportunity in quality

The Q4 report demonstrated SCA is able to generate healthy earnings in tough markets. It guides for better 2024 market conditions for all industries, which we find encouraging given the earnings leverage to better prices and volumes. With the stock under pressure due to published commentary regarding mismanaged operations and accounting fraud (groundless, in our view), we see a solid entry point in a high-quality name, and we also continue to find consensus earnings outlook too low for 2024e. We...

SCA (Buy, TP: SEK180.00) - Q4 should mark the bottom

Due to FX and lower price assumptions for sawn wood and containerboard, we have trimmed our 2024–2025e earnings forecast, but remain well above consensus. We see plenty of value in SCA and good risk/reward, benefiting from its unique backward-integrated business model, improving pulp and containerboard markets, and a significant earnings tailwind from completed large investments in 2024–2025e. We reiterate our BUY, but have lowered our target price to SEK180 (190).

SCA (Buy, TP: SEK185.00) - Earnings growth is on

We have trimmed our earnings forecasts, but remain well above consensus for 2024e. We still see plenty of value in SCA, as well as a good risk/reward, with evidence of better pulp markets and signs the painful inventory adjustment in the containerboard business is set to ease, plus a significant earnings tailwind from FX and completed large investments. We reiterate our BUY and SEK185 target price.

Northern Lights

SCA (Buy, TP: SEK185.00) - Earnings resilience and leverage

Due to its integrated business model, good access to relatively cheap wood, well-invested industry assets and tailwind from completed growth investments, we believe SCA is positioned to outclass its peers on earnings. Given improving prices for containerboard and pulp but also a weaker SEK, we expect 2024 EBITDA to grow 42% YOY to close to SEK10bn. We believe 2024e consensus is much too cautious, and see significant valuation upside potential and an attractive investment case. We reiterate our B...

SCA (Buy, TP: SEK185.00) - In pole position

SCA’s robust Q2 results were largely in line with our forecast. We find it highly encouraging that the new business division, Renewable Energy, enjoyed a strong performance, and balanced the cyclical earnings weakness from the industry divisions. Although we have slightly lowered our expectations for the containerboard business, this is offset by the small but highly profitable Renewable Energy business. We reiterate our BUY and SEK185 target price.

SCA (Buy, TP: SEK185.00) - Harsh markets but robust company

Reflecting harsher than expected market terms, especially for pulp (but also new FX assumptions), we have cut our 2023–2024e EBITDA by 9–4%. However, our positive long-term view remains intact, and given muted near-term earnings expectations and that our 2024e is well above consensus, we see good risk/reward as we near the Q2 report. We reiterate our BUY but have cut our target price to SEK185 (190).

Northern Lights

SCA (Buy, TP: SEK190.00) - Deep roots ahead of a recovery

Unlike many of its peers, we believe SCA will continue to generate healthy earnings through the cyclical trough and into a market recovery. Based on company self-help and normalised (mid-cycle) market conditions, we estimate annual cash earnings of cSEK7bn by 2025, implying a 7% FCF yield – which we find attractive, with growth underpinned by megatrends and high barriers to entry. We reiterate our BUY and SEK190 target price.

SCA (Buy, TP: SEK190.00) - Backward integration = low costs

The Q1 report was solid across the board, and we note three key attractions: 1) the backward-integrated business model supported group earnings thanks to the lowest wood costs in the industry; 2) the CEO said prices for the important wood production had bottomed out and looked to move up 5–10% in Q2; and 3) the new Renewable Energy division (where prices are less cyclical) reported surprisingly strong profits in Q1. We reiterate our BUY and SEK190 target price.

SCA (Buy, TP: SEK190.00) - Buying opportunity in quality

On concerns about falling prices for pulp and containerboard, SCA has traded much lower lately. However, given the intrinsic value in the asset portfolio being heavily tilted to forestland, we find this weakness unfounded and see an excellent entry point into this quality stock particularly as we believe current product price weakness should be temporary. We reiterate our BUY but have cut our target price to SEK190 (208) reflecting negative 2023e revisions.

Northern Lights

SCA (Buy, TP: SEK208.00) - Strong profits in uncertain times

In our view, the Q4 results clearly showed the strength of the backward-integrated business model with own forests, which helps SCA to mitigate severe cost inflation on pulp wood. Although the results prompted us to cut our 2023e EBITDA by c10%, our earnings scenario remains attractive and we find it positive that SCA increased the book value of its forestry land to SEK139/share (SEK120 a year ago). With confidence in the value story and the new strategy of investing in wind parks, we reiterate ...

Northern Lights

SCA (Buy, TP: SEK208.00) - New kids on the block

Although we have cut our 2023–2024e EBITDA, our earnings scenario remains much above Bloomberg consensus. Due to its backward-integrated business model, SCA is less affected by cost inflation than the rest of the industry, while its forestland provides interesting new opportunities in renewable energy. In December it also made a first step in investing in its own wind parks, and in 2023–2024 we believe it will deploy several billion SEK in this new lucrative field. We reiterate our BUY and targe...

Sector Fast Comment - October pulp data: shipments +2% y-o-y

Global shipments: +2% y-o-y, China +8% Pulp prices have started to fall but show resilience '23 supply manageable, but a recession could hit demand

SCA - Growth projects and forest values

SCA's growth projects could lift EBIT by +40% Price direction is down for sawmills and kraftliner Forest values rise further; SOTP SEK 185-200

Sector Fast Comment - September pulp data: shipments +5% y-o-y

Global shipments: +5% y-o-y, China +1% Pulp prices have started to fall amid a weaker cycle ’23 supply manageable, but a recession could hit demand