Mondi: Catalyst Alert: Q2 step-down not fully reflected. Q2 results 30 July – negative

Research evidence excerpt

Mondi: Catalyst Alert: Q2 step-down not fully reflected. Q2 results 30 July – negative

Barclays | Mondi

will be difficult for the industry to pass on more pricing and it could actually come under

pressure if demand does not improve.

Prior to the recent organic investments in corrugated and flexible packaging, Mondi generated

€600mn+ of FCF p.a. Despite a reduction in capex to c€550mn (or lower) p.a from 2026E, we

expect FCF generation to remain subdued at c€200mn p.a over FY26-28E and leverage to remain

2x+ even in FY28E.

What the market is missing: We think there is an expectation of European price increases to

continue in the near term. However, in our view, containerboard prices in Europe could come

under pressure again as energy costs come down, unless there are significant capacity

shutdowns. Containerboard demand in Europe is growing by 1% p.a. currently whereas new

capacity is ramping up and outpacing demand growth – utilisation rates across key European

packaging markets remains low, reflecting both weak demand and excess capacity in the

system. This limits pricing power and delays margin recovery, particularly in corrugated and

converting operations where competitive intensity remains elevated.

Valuation: Mondi is currently trading at ~6.7x EV/FY27E EBITDA, broadly in-line with SW. We

think Mondi should trade at a lower multiple vs. SW given recent capacity expansion by Mondi

(and overcapacity in Europe) and SW's significant US exposure where the industry dynamics are

strong with utilisation rates 90%+. We apply ~5x EV/EBITDA multiple to Mondi's corrugated

packaging segment (includes uncoated fine paper exposure) and ~7x to flexible packaging on

slightly lowered estimates to arrive at our price target of 640p (from 680p).