Credit Suisse downgrades Mondi, upgrades DS Smith

Mondi was cut to ‘underperform’ from ‘outperform’ and the target price reduced to 1,600p from 1,800p.

CS said it had shaved off around 1% from its 2022 earnings per share estimate and cut 2023-24 EPS estimates by an average of 18%, reflecting wood cost inflation and forecast lower commodity prices.

"Our estimates are 7% below consensus on 2023 EBITDA (10% on EPS) with the shares trading at a premium versus peers (and history) while Mondi’s greater earnings cyclicality heading into a weaker economic environment and uncertainty around the timing and receipt of Russian mill disposal adds incremental ambiguity to the investment case," it said.

The bank lifted DS Smith to ‘outperform’ from ‘neutral’ and upped the price target to 390p from 340p.

"We raise our FY23-25 EBITDA estimates by an average of 5% and EPS by 7% on improving price/cost," it said.

"Favourable energy hedges covering 90% of needs in FY23 and 80% of needs in FY24 give good visibility on energy costs."

CS said its FY23 and FY24 EPS estimates are 10% and 8% ahead of consensus, respectively.

In the same note, Credit Suisse reiterated its preference for ‘outperform’ rated Smurfit Kappa, which it said exhibits the sector’s greatest margin stability and a track record of highly accretive capital allocation.