EQS Group-News: Research Dynamics
/ Key word(s): Research Update
This report is published by Research Dynamics, an independent research boutique
The newspaper and magazine paper market has been bearing the brunt of twin challenges for many years. On one hand, the growing importance of digital channels has led to the falling consumption of print media by -8 to 10% a year; on the other hand, the excess capacities have had an adverse impact on the realizations. However, the company responded to market developments with key strategic thrusts. Through efficient structures and processes, it emerged as the most cost-efficient player in the region. Over 2009-2019, Perlen Papier has been able to reduce its variable costs by 32% and fixed costs by 49%. Over the same period, the cumulative productivity gains were +72%. With its direct customer contacts and efficient customer services, Perlen has been able to increase its market share in Western Europe from 2.5% to about 7%. Moreover, Perlen's focus on differentiation through modified and eco-efficient products also helped. All these measures have helped the division consistently deliver an EBITDA margin (for Perlen) higher than the competitors.
We remain encouraged by the management's focus on keeping the operations competitive even during the challenging times like we are facing at present. Most importantly, while doing so the group has not taken the focus off the commitment towards environmental sustainability, which has never been so important as the way it today is as the world goes through rapid climate changes. That said, in the short-term, we expect the uncertainty to continue in 2H2020 as economic activity is likely to pick up only gradually amidst the ongoing coronavirus pandemic. However, in the medium term, as business activity picks up steam, we expect the valuation discount to narrow and the stock to witness a revaluation. We opine that the company's growth prospects in key markets, improved operating efficiencies from new production facilities, and expansion of the Packaging and Chemistry Divisions should lead to a valuation improvement. The Paper Division should benefit from the local market, cost leadership, cost-saving initiatives, advanced technology and continued operational improvements, although the business environment continues to remain challenging due to over-capacities and decreasing demand for newsprint paper. However, over time the tough operating environment may push marginal paper producers out of business which should lead to reduced capacities and aid recovery in paper prices. Moreover, we expect the group-level cost optimization initiatives to offer support to the company's stock price. Additional features: File: CPHN_Investor Day Update_Research Dynamics_17.9.2020 End of Media Release |
1133247 17.09.2020