Finland Pulp Production Curtailments

Research evidence excerpt

Finland Pulp Production Curtailments

UpdateMValuation Methodology and Risks

Svenska Cellulosa Aktiebolaget SCA (SCAb.ST)

Our valuation is based on a simple average of EV/EBITDA and P/NPV. We use an EV/EBITDA

multiple of 19.0x, in line with SCA's 8-year average and adjusted for the Forest FV

effects. Our target P/NPV is 1.0x with a WACC of: (1) 4.4% for Forest, (2) 7.7% for Wood

Products, Board and Paper, and (3) 6.4% for Renewable Energy. We assume 1% terminal

growth for all segments.

Risks to Upside

n Moderating wood cost inflation

n Faster recovery in construction cycle

n Higher pulp prices

Risks to Downside

n Structural pressure on wood product activities

n Slower interest rate easing cycle, weighing on construction

n Weaker economics in renewable energy projects

Stora Enso Oyj (STERV.HE)

We value Stora Enso based on a simple average of our exit EV/EBITDA (in line with the histor-

ical 10-year average EV/EBITDA) and P/NAV methodologies. This allows us to reflect both the

shorter-term earnings power and longer-term value of the company. We apply an EV/EBITDA

multiple of 8.2x and a 1.0x multiple to our NPV estimate, which is based on a blended WACC

of 6.5% with 1% perpetuity growth.

n Large cost-saving drive provides a stronger-than-expected earnings tailwind.

n Oulu ramp-up proves more earnings-accretive than we expect.

n Swedish forest sale prices exceed expectations.

n Extended downcycle in EU packaging and global pulp that keeps margins under pres-

sure.

n Swedish forest sale price and debt transfer disappoint.

UPM-Kymmene Oyj (UPM.HE)

We value UPM based on a simple average of our exit EV/EBITDA (based on historical 10-year

average EV/EBITDA) and DCF methodologies. This allows us to reflect both the shorter-term

earnings power and longer-term value of the company.