Nordea and Bank of America (BofA) reiterate Buy on hygiene and healthcare company Essity with price targets of SEK 315 and SEK 305, respectively. Pareto Securities reiterates Hold and lowers its price target to SEK 270 from SEK 271.
The analysts note that the third quarter was characterised by weak organic growth but stronger-than-expected earnings. Adjusted EBITA amounted to SEK 4.7 billion, around 6–7 percent above expectations, while organic growth was negative at 0.3 percent.
Nordea highlights the company’s potential for margin improvements and opportunities to grow in North America, where profitability is deemed to be structurally higher. The bank also sees a potential divestment of Consumer Tissue as a share-price catalyst. A long-term scenario involving a divestment, share buybacks and further cost savings indicates around 45 percent upside over a three-year horizon.
BofA highlights Essity’s resilience to cost inflation and expects organic growth to recover to 1.6 percent in the fourth quarter. At the same time, higher raw-material costs are expected to weigh on earnings by nearly SEK 1.4 billion. The bank considers the stock’s 24 percent valuation discount to comparable companies attractive.
Pareto is more cautious and points to stagnant growth, rising costs and pressured margins within Consumer Tissue. The analyst house warns that weaker profitability could limit the value of a potential spin-off. Pareto also estimates that the stock’s valuation, around 5 percent above the historical average adjusted for the interest-rate environment, limits the upside.
Among other analyst houses, Handelsbanken has raised its price target from SEK 300 to SEK 305. ABG has also raised its price target from SEK 280 to SEK 300. Both reiterate Buy.
