IFP: Doing good work in a slow market

Research evidence excerpt

IFP: Doing good work in a slow market

Interfor Corporation

Target/Upside/Downside Scenarios Investment summary

We view Interfor as well-positioned to maximize pricingInterfor Corporation

realizations given its flexible, geographically diversified lumber

30 125 Weeks 25DEC23 - 15MAY26 platform, and we expect additional margin expansion over the

25 longer term as it optimizes its sawmill system, although we

20 think delevering is Interfor's top priority over the near term.

TARGETTARGET 12.0012.00 Risks to rating and price target

CURRENTCURRENT 8.578.57 • Currency risk: Interfor’s operating results are sensitive to

5 fluctuation in the exchange rate of the Canadian dollar

0 relative to the US dollar. An increase in the value of the

10m Canadian dollar reduces the company’s realized sales, which

5m are mostly priced in US dollars.

2024 2025 2026

D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M • Cyclicality of lumber pricing: The company’s financial

IFP CN Rel. S&P/TSX COMP IDX MA 40 weeks performance is dependent on the selling prices of its

Source: Bloomberg and RBC Capital Markets estimates for Target products, which historically have been quite volatile.

Valuation Lumber pricing may be characterized by periods of

Our $12 price target supports our Outperform rating. Our excess supply due to capacity additions and/or periods

price target is based on a 4.25x EV/EBITDA multiple on our of insufficient demand due to weak general economic

Trend EBITDA estimate of $425MM (85%) and our 2026E conditions.

EBITDA of $197MM (15%). We believe Interfor should trade • Capital requirements: The forest products industry is

toward the lower end of the typical Canadian Paper & Forest capital-intensive, with regular capital expenditures to