UPM: Q2‘26: Guidance for H2‘26 suggests material downgrades to 2026 and 2027 numbers. Remains a core Underweight

Research evidence excerpt

UPM: Q2‘26: Guidance for H2‘26 suggests material downgrades to 2026 and 2027 numbers. Remains a core Underweight

Detlef Winckelmann AC Europe Equity Research

(44-20) 3493-5190 23 July 2026 J P M O R G A N

detlef.winckelmann@jpmorgan.com

Investment Thesis, Valuation and Risks

UPM (Underweight; Price Target: €19.20)

Investment Thesis

After factoring in indirect exposure through graphic paper, pulp prices are important for

~60% of Group EBITDA. Moving into 2026 and 2027, hardwood pulp operating rates look

manageable but low in the mid-80s which implies that price appreciation, if any, should be

milder than normal. However, beyond 2027, the hardwood pulp supply/demand picture

looks increasingly worse with confirmed capacity already guaranteeing excess supply and,

if we factor in unconfirmed but likely new supply, the picture gets even more challenging.

In our view, this negative ST-MT term trajectory will weigh on the stock even if there is an

occasional, brief, pulp price rally due to unexpected outages or supply disruptions. Energy

prices moving higher are a positive, but, considering the forward curves still imply a decline

in energy prices, we don’t think investors will ascribe a high multiple to this energy related

“bonus”. Further, on our numbers, UPM trades at an FY 2027 EV/EBITDA of 9.5x, ~15%

above its historical average, which implies that valuation won’t be a driver of returns either.

Valuation

We conduct a SotP valuation of each of UPM’s segments assuming LT hardwood pulp prices

of $600/t. Our SotP implies a 7.3x multiple (one year-forward) and a 31 December 2027

target price of €19.2/share.

SotP valuation

€m

Segment LTM 31-Dec 2028 EBITDA Peer multiples Premium/discount Applied multiple Enterprise value

UPM Fibres at $600/t HW 1,141 6.8 0% 6.8 7,758