UBS has downgraded Stora Enso to “neutral” from “buy,” lowering its 12-month price target to €10.70 from €10.80, citing persistent overcapacity in the packaging sector and limited near-term earnings upside despite recent share gains, in a note dated Thursday.
The downgrade follows a more than 30% rebound in Stora Enso’s stock since April, driven by the completion of a €900 million sale of 12% of its Swedish forest assets and an announced review of a potential forest spin-off.
UBS noted that while falling pulpwood prices and signs of a hardwood pulp price trough could aid margins, Stora Enso’s heavy exposure to folding boxboard (FBB) and containerboard markets remains a constraint.
The company is ramping up its 750,000-tonne Oulu project, which is expected to weigh on EBIT by €100 million in 2025, adding to existing oversupply.
New 15% tariffs on EU FBB shipments to the U.S. and about 7% increase in EU recycled containerboard capacity in the second quarter are expected to keep utilisation rates low without significant industry closures.
Packaging materials account for about 30% of Stora Enso’s EBIT and forest operations about 60% (2025 estimates), making the packaging division a key earnings driver.
UBS forecasts 2025 EBIT of €515 million, down from €524 million previously, and expects only gradual recovery in the coming years, with EBIT margins rising from 5.4% in 2025 to 8.7% in 2027.
The brokerage values Stora Enso using a mix of discounted cash flow and EV/EBITDA multiples, applying a 16% discount to the book value of forest assets for deferred tax.
UBS estimates the current share price already factors in a medium-term EBITDA recovery of over 30%, limiting upside potential in the near term.
Source :
https://www.investing.com/news/stock-market-news/ubs-downgrades-stora-enso-to-neutral-on-packaging-glut-weak-near-term-outlook-4191719
