In a note to clients, the Swiss bank’s analysts said, in their view, as the biggest corrugated packaging producer in Western Europe, Smurfit is well-positioned to benefit from secular trends in the market to drive growth.
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They pointed out that operating rates in the industry have steadily increased since 2012 and given no major capacity addition, the analysts expect a continued strengthening of operating rates in the coming years.
The analysts said the FTSE 100-listed group could, therefore, strengthen its position further by investing in its current operations as well as consolidating the market.
They added: “Looking at 2019E-20E, we believe earnings are underpinned by continued volumes growth, some easing cost pressure as well as investments, and expect a flattish EPS in 2019E and 7% growth in 2020E (7% ahead of cons.).”
The analysts concluded that Smurfit’s valuation is modest, with the group trading at around a 12% discount to its peers and noted that its reverse discounted cash flow forecast indicates that no terminal growth is priced into the shares.
In late morning trading, Smurfit Kapa shares were 0.2% firmer at 2,170p.