Jefferies likes Ence's cost advantage but lower pulp prices loom in 2023

ENCE Energia y Celulosa SA

19/10/2022 10:36

** Jefferies initiates Spanish pulp and renewable energy producer Ence  ENC.MC  with "hold",
expecting its raw material cost advantages to be offset by a decline in pulp prices and macro
environment in 2023
    ** The broker likes Ence's raw material cost sourcing advantages vs peers and medium-term
energy growth opportunities
    ** It also points to the company's clear return on capital employed (ROCE) targets and
balance sheet to self-finance investments and support dividends
    ** However, it expects pulp sector prices to fall from the Q3 highs, as the global pulp
supply will outpace demand into next year, leading to a year-on-year decline in Ence's pulp
division EBITDA
    ** It also warns of a negative impact to Q3 pulp EBITDA due to the production halt at
Pontevedra pulp mill, given the company's limited production sites
    ** Jefferies sets the target price at 3.75 euros vs 3.45 euros per share at Tuesday's close
    ** Out of 11 analysts that cover Ence, six rate the stock "strong buy" or "buy" and ​five
"hold"
 (Reporting by Marta Serafinko)
 ((Marta.Serafinko@thomsonreuters.com; +48 58 769 66 00;))