JPMorgan upgrades Mondi to 'overweight'

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JPMorgan upgrades Mondi to 'overweight'

Fri, 17 February 2017
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JPMorgan upgrades Mondi to 'overweight'

(ShareCast News) - JPMorgan Cazenove upgraded paper and packaging company Mondi to 'overweight' from 'neutral' and lifted the price target to 2,070p from 1,600p.
The bank said it expects the tightening in Mondi's key markets and rising old corrugate container/pulp input costs - from which Mondi derives net benefit as a mostly integrated producer - to support price hikes from the second quarter.

This drives upgrades of around 6% to its FY17 earnings per share forecasts and 3% to FY18 estimates.

JPM pointed out that Mondi's key markets are tightening on the back of strong demand, limited near-term capacity additions and lack of spare capacity in the US (a major exporter into Europe), assisted by rising input costs.

"Moreover, we expect Mondi's balance sheet to continue to offer optionality in the form of further M&A or cash returns, given low levels of leverage.

"On 14.3x FY17e price to earnings, some of the improved outlook is priced in, but Mondi tends to rerate in a price hiking cycle and, in a reflationary environment, we think there will be more to go given improved pricing power."

At 0806 GMT, the shares were up 1.2% to 1,860p.