On Thursday, Mondi Plc. (LON:MNDI:LB) (OTC: MONDY), an international packaging and paper group, received an upgrade in stock rating by Jefferies from Hold to Buy. The investment firm set a new price target for Mondi shares at GBP16.50. The upgrade follows a period of underperformance year-to-date for Mondi's stock.
The analyst from Jefferies cited the strategic benefits of the company's merger, highlighting the potential for substantial synergies and value creation. The expected synergies are estimated to be around €300 million. This optimistic outlook on the merger's impact on the industry has contributed to the positive revision of Mondi's stock rating.
Mondi's performance is being closely observed in the context of its recent strategic moves. The analyst's commentary suggests a preference for Smith, D.S. Plc. (SMDS) in the short term due to technical pressures on Mondi's shares. Still, the long-term view for Mondi, post-merger and after realizing synergies, appears favorable with a projection of significant upside potential.
Looking ahead, the firm anticipates that by 2027 and beyond, after the synergies are fully realized, Mondi's earnings before interest, taxes, depreciation, and amortization (EBITDA) could exceed €3.3 billion with earnings per share (EPS) surpassing €2. This scenario could imply an upside of over 50% for the stock, based on a mid-cycle 7.5x EV/EBITDA ratio.
Investors are now watching Mondi as the company navigates through its strategic initiatives and the broader industry consolidation, with Jefferies' recent upgrade indicating a bullish stance on the stock's potential.
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