In a report released today, Ioannis Masvoulas from Morgan Stanley upgraded UPM Kymmene to a Buy, with a price target of €30.00.
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Ioannis Masvoulas has given his Buy rating due to a combination of factors that highlight UPM Kymmene’s strong financial prospects and strategic positioning. The company is set to benefit from a significant reduction in capital expenditure, which is expected to enhance its free cash flow conversion to over 65% and yield a free cash flow yield of 10%. Additionally, UPM’s strategic initiatives, such as optimizing its pulp operations in Uruguay and advancing its biofuels and biochemicals segments, are poised to contribute positively to earnings in the coming years.
UPM’s transformation from a graphic paper producer to a diversified entity with a robust portfolio further supports the Buy rating. The company’s largest segment, Fibres, is positioned for structural cost improvements, while its Advanced Materials segment delivers high returns. Despite current challenges in pulp prices, UPM’s substantial capacity offers leverage for future upcycles. The company’s attractive valuation compared to Nordic peers and its potential for re-rating as cash returns materialize make it an appealing investment opportunity.
Masvoulas covers the Basic Materials sector, focusing on stocks such as Lundin Mining, Antofagasta, and Holmen AB. According to TipRanks, Masvoulas has an average return of 5.9% and a 60.80% success rate on recommended stocks.
In another report released on October 27, J.P. Morgan also maintained a Buy rating on the stock with a €26.20 price target.