Leumi Partners: 14% upside for Hadera Paper – NIS 194 per share – capital market

The analyst Roni Slutsky from Leumi Partners, Grants to stock

Hadera paper
+ 3.47%

Base:17,000

opening:17,000

Tall:17,740

low:17,000

change:540,647

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A buy recommendation with a target price of NIS 194 per share, which reflects an upside of about 14% on the base price this morning. all this, In light of the buds of a change in trend in the prices of paper rolls per carton and in the prices of cellulose, together with the company’s efficiency measures and plans for further efficiency (conversion of the machine).

Regarding the paper roll market, Slutsky estimates that “price increases will be reflected in the results of the first quarter of 2021. In the last two years, the paper roll market for cardboard has experienced a severe crisis as a result of the trade war between China and the United States. Both countries, and consequently, a sharp decline in demand for paper rolls. “A drop in price of a similar intensity has not been seen in the paper roll carton market since the financial crisis about a decade ago.”

“In September this year there was a change in trend, and the prices of paper rolls rose by about $ 50 per ton, while the price continued to climb in November and December by another $ 20, and forecasts are for a further increase in early 2021. The rise in prices is supported by demand “The conversion of consumption from services to products following the corona crisis. In addition, cellulose prices also began to rise in December, which will lead to a further increase in the prices of rolls of paper per carton.”

Another point she points out is the streamlining measures taken by the company and beginning to be reflected, as well as plans for further streamlining. “Despite the erosion in world waste prices, Amnir has managed to increase its operating profit rate in the first nine months of 2020 compared to the same period last year by reducing operating costs.”

“Over the past year, the company has become more operationally efficient and increased its output on machine 8 (which for the first time exceeded the production of 220,000 tons). In addition, the company accelerated the graffiti merger with Galil On, thereby reducing costs. Next year (and with a one-year postponement due to the corona crisis), the company will begin converting the machine for stationery into a machine that will produce rolls of paper for cardboard (an addition of about 140,000 tons), an investment estimated at NIS 200 million. The company will be able to produce both white paper for the stationery sector and brown paper for the paper roll rolls for cardboard, according to need and maximum benefit. ”