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Aug 17 2020, 07:05 IST/BST
Paper & Packaging
Upgrading forecasts to reflect better volumes; earnings momentum turns positive
- Sectors : Paper & Packaging
- Companies : Mondi | Smurfit Westrock | DS Smith
Ratings
Ratings and price correct at time of issue
| Company | Rating | Date | Previous Rating | Date | Closing Price |
|---|---|---|---|---|---|
| DS Smith | NEUTRAL | 03/04/19 | Outperform | 18/05/18 | 278p |
| Mondi | NEUTRAL | 05/05/20 | Outperform | 19/06/12 | 1529.0p |
| Smurfit Westrock | OUTPERFORM | 30/06/09 | N/A | N/A | 3038c |
DAVY VIEW
Markets are efficient. Our 2020 EBITDA forecasts for the packaging sector are 14% lower compared to the start of the year. The sector has sold off a similar amount, with Smurfit Kappa Group (SKG) outperforming its peers. The sector, however, demonstrated greater resilience to the COVID-related demand shock in H1, which is the basis of our upgrade today. With earnings momentum turning positive and strong cash generation set to continue, the Boards of both SKG and Mondi were confident enough to resume dividend payments. These stocks look undervalued relative to their earnings ability and financial strength.
