Sappi Ltd: A wide outcome range supports a Neutral rating

Research evidence excerpt

Sappi Ltd: A wide outcome range supports a Neutral rating

The proposed JV GP JV

with UPM is currently in Phase II of the European Commission's merger control investigation and is

expected to close by end-26. Excluding any JV benefit, we forecast leverage of 5.2x by Mar-27E.

Assuming completion of the JV and receipt of the expected ~$160m upfront payment, we estimate

ND/EBITDA would improve only to ~4.8x. On our forecasts, leverage does not fall below 4x until

FY28E.

UBS VIEW We rate Sappi Neutral. At ~5.0x 2027E EV/EBITDA, the shares trade in line with their LT avg and

appear fairly valued. We remain cautious given weak SBS markets, softer DWP pricing and elevated

leverage. Although we expect another covenant waiver, we believe this is largely priced in.

EVIDENCE We analyse Sappi’s key end markets, where pulp oversupply and SBS capacity additions are likely to

pressure pricing and operating rates. In our view, this will weigh on EBITDA and slow the process of

deleveraging the balance sheet into March-2027.

WHAT´S PRICED IN? Sappi trades on ~5.0x 2027E EV/EBITDA (at a justified 30% discount to peers, in our view), in line

with its LT avg and close to fair value. The valuation implies ~$490m EBITDA (DWP ~$830/t; P&S

margins ~6%) and already reflects expectations of another temporary covenant waiver, in our view.

Upside/Downside report fo

Spectrum r an ex

this

of

tive

arra

e/chart he n

his imag to t

on of t

Plea se r efer planati

Key product Key product EBITDA margin EV/EBITDA

Value drivers

prices 2027E volume 2027E 2027E % CY 2027E

RCnt 2,030 upside +3.3% 2.5% 9.7% 5.0x

RCnt 1,230 base +1.8% 0.5% 9.1% 5.0x

RCnt 186 downside -1.0% -1.5% 8.3% 5.0x

Source: UBS estimates

Sappi is a South Africa-based global forestry products company with operations spanning graphic