On Monday, Citi revised its price target for Mondi PLC (LON:MNDI:LN) (OTC: MONDY), a leading packaging and paper group, reducing it to GBP16.50 from the previous GBP20.00, while still endorsing the stock with a Buy rating. The adjustment follows a recent trading update that saw Mondi's shares drop by 7% on Sunday.
The investment firm highlighted that the decrease in share price might have been an overreaction to the company's EBITDA miss. The concerns seem to stem from potential declines in containerboard prices and diminishing expectations for volume growth. Additional pressures include the rescheduling of maintenance from the second to the third quarter and a negative revaluation of South African forestry assets.
Citi's analysis suggests that, after accounting for these factors, the underlying business's EBITDA for the third quarter would show a quarter-over-quarter decrease of only 11%, following a significant 69% increase in the second quarter. The firm has slightly lowered its fourth-quarter estimates and trimmed its forecasts for 2025 due to the near-term fading momentum in board prices.
The rate of volume recovery is also reportedly slowing, although Citi still anticipates sequential growth in the first half of the year, albeit at a slower pace than previously expected. Despite these challenges, Citi reaffirms its positive outlook on Mondi's stock.
Citi remains optimistic about Mondi's long-term EBITDA growth, which they believe is currently undervalued by the market. They expect that investor sentiment will improve as earnings gains from increased volumes at Mondi's Steti and Duino facilities, as well as from the acquired Schumacher assets, become more evident.
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