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Credit Suisse raises Mondi EPS forecasts out to 2020, upgrades
Analysts at Credit Suisse upgraded their recommendation on shares of Mondi from 'neutral' to 'outperform' after raising their estimates for the company's profits out to 2020.
And yet the shares had "essentially flatlined" over the past 12 months, analyst Lars Kjellberg said in a research report sent to clients.
Kjellberg raised his earnings per share estimates for the company in 2018 by 6%, those for 2019 by 7% and introduced a 2020 EPS forecast of 1.89.
As a result, his target price was lifted from 2,220p to 2,345p.
Critically, the company's 2017 return on capital employed of 19.7% was between 400 and 500 basis points ahead of those of its peers.
"Mondi's balanced capital allocation between accretive M&A, organic capex (at high incremental returns) and capital returns (Eu1/sh extra dividend in addition to Eu0.62 ordinary dividend, 7.6% yield) should secure Mondi's position of industry leading returns.
"Mondi's strong balance sheet and low cost asset base reduce risk as well as potential for accretive use of capital, adding attraction to the share, in our view," the analyst said.
According to Kjellberg, to all of the above one needed to add the favourable market backdrop in the company's key packaging operations and strong earnings momentum heading into 2018, adding that the valuation was "attractive" after the firm paid out a special dividend.