Mondi now has the right package for Credit Suisse

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A favourable fundamental backdrop in Mondi’s key packaging operations and strong earnings momentum heading into 2018 adds upside to market estimates, in our view,” CS said


It all seems to be happening in the normally dull and dusty world of packaging at the moment with upgrading ().


The upgrade, from ‘neutral’ to ‘outperform’, comes on the day that packaging giant and FTSE 100 constituent PLC (LON:) rejected a bid from American rival International Paper Co ().


READ: Early Christmas present: Mondi wraps up acquisition of Finnish pulp and paper mill operator Powerflute for €365mln


The upgrade lit a fire under the paper & packaging company’s share price, which rose 4.2% to 1,985.5p.


The stock has not been the most exciting investment, essentially going nowhere over the last year, but during that period argues that the company’s earnings prospects and valuation metrics have materially improved.


The Swiss bank has increased its earnings per share (EPS) forecast for the current year by 6%; next year’s EPS forecast goes up by 7% while Credit Suisse (CS) has introduced a 2020 EPS forecast of €1.89.


Mondi’s strong balance sheet and low cost asset base reduces risk and also provides the potential for earnings-enhancing acquisitions, CS argues.


“A favourable fundamental backdrop in Mondi’s key packaging operations and strong earnings momentum heading into 2018 adds upside to market estimates, in our view,” CS said.


The bank’s discounted cash flow-based valuation values the shares at 2,345p, up from its previous price target of 2,220p.


“We see significant upside to our target from Mondi’s balanced accretive capital deployment. We see the risk/reward as attractive with the share trading 11% below the mid-point of our Blue Sky (2,745p) and Grey Sky (1,480p) scenario analysis,” CS concluded.



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