JPM says extra pulp supply to weigh on prices for Nordic forestry firms

Svenska Cellulosa Aktiebolaget SCA

13/08/2024 08:46

** J.P.Morgan expects difficulties for Nordic forestry firms
in the short term due to a potential decline in pulp prices
    ** New pulp supply from Cerrado and Liansheng might push
prices temporarily below cost support in the near term, JPM says
    ** Medium-term outlook is relatively positive, with no new
major supply additions expected in 2026-2028, while the share
price weakness would suggest continued pulp price weakness
beyond 2024/2025, it says
    ** JPM downgrades Stora Enso  STERV.HE  to "neutral" from
"overweight", saying the expected recovery in the Finnish firm's
operating leverage was weaker than expected in Q2
    ** It favours UPM  UPM.HE  ("overweight"), pointing to high
levels of free cash flow which imply potential for share
buybacks or increased dividends in 2025/26
    ** It keeps "underweight" rating for Svenska Cellulosa SCA
 SCAb.ST , pointing to the "over-stated" book value of the
Swedish group's forest assets
    
    JPM'S RATINGS AND PRICE TARGETS:
  
 COMPANY      RATING       OLD RATING   PT          OLD PT
 UPM          overweight   n/a          37.50       38.00
 Stora Enso   neutral      overweight   14.00       16.10
 SCA          underweight  n/a          135.00      146.00
 
 (Reporting by Tomasz Kanik)
 ((tomasz.kanik@thomsonreuters.com))