Credit Suisse cuts Mondi price target on Russia exit

Credit Suisse cuts its price target on Mondi shares on Monday to 1,940p from 2,150p to reflect the paper and packaging group’s decision to divest its high-margin Russian operations.

Credit Suisse said the Russia divestiture due to the Ukraine war was "a major setback" for Mondi.

In its 2022-2024 forecast period, it estimates it would remove around €360m from annual EBITDA, €185m from free cash flow and 50 cents from earnings per share, reduce the potential for high-return growth investments, and lower sustainable group margins by around 110 basis points.

"In our DCF valuation the equity value of Mondi declines 22% versus steady state, reflected in our lowered price target. Removing Russia from our valuation of the share is partially offset by our upgraded underlying earnings estimates, limiting the reduction of our target price to 10%," the bank said.

At the first-half results due in August, Credit Suisse said it sees slowing demand and a potential loss of pricing power as the main risks to its earnings estimates, target price and ‘outperform’ rating.