On Wednesday, Barclays shifted its stance on Mondi PLC (LON:MNDI:LN) (OTC: MONDY) stock, raising the rating from Underweight to Equalweight. The firm also increased Mondi's price target to £14.70 from £13.80. The upgrade follows a decrease in the company's share price, which now sits below the revised target.
The report from Barclays notes that the consensus forecast for Mondi's fiscal year 2025 earnings has moved closer to the firm's own projections, suggesting a lower risk of future earnings estimates being missed.
The analyst pointed out that Mondi's stock price reduction and the alignment of consensus figures with their estimates prompted the change in rating.
Mondi's operational outlook was also a factor in the upgrade, with the company indicating that wood costs in Eastern Europe are showing signs of stability or decline. This trend could enhance Mondi's competitiveness against Scandinavian firms over the medium to long term, particularly in terms of cost.
Despite the positive adjustment, Barclays maintains a cautious view on Mondi's ambitious capital expenditure plans. The analyst expressed concern that Mondi's significant investments, including the ongoing expansion of its Hinton Canada sack paper project, could lead to challenges in capacity utilization should the industry face a cyclical downturn after fiscal year 2025.
The valuation method used by Barclays remains consistent, applying an unchanged multiple of approximately 12 times price-to-earnings to the average forecasted earnings per share for fiscal years 2025 and 2026. This approach underpins the new price target of 1470 pence for Mondi's shares.
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