Research Dynamics
Research Dynamics – Report on CPHN: Event Update

This report is published by Research Dynamics, an independent research boutique

Strong volumes and higher realizations lifts CPH’s profitability

FY2022 guidance raised again with group EBIT guided above CHF 100 million

CPH Group yet again lifted the FY2022 guidance on continued strength in volumes and realization, which was led by strong demand and in part resulted from an increase in the price of raw materials. The company now expects net sales for FY2022 to be well over CHF 700 million.

The upward revision in guidance is led by the Paper Division, which is projected to report highest sales growth taking revenue close to ~CHF 400 million for the year. The division is also expected to report annual EBIT in the high double-digit millions. Further, the Chemistry and Packaging divisions could witness double-digit million operating results, which will further aid the Group in achieving the Group EBIT of more than CHF 100 million in FY2022. The net group result for the year is projected to reach around CHF 100 million, barring any unforeseen new variables.
 

Other Highlights

The CPH Group stated in the summer of 2021 that it would be supplying water and electricity to the Schilliger Holz AG and proposed a new wood-fibre insulation board manufacturing facility on land owned by Perlen Papier AG at its Perlen location. The planned project is no longer feasible because of the sharp rises in energy prices.
 

Valuation and conclusion

We value CPH using DCF and relative valuation techniques. Our intrinsic value of CHF 98.6 per share (higher than our last estimated target price of CHF 97.7 per share) implies an upside of ~30% from current levels. For relative valuation, since the Group operates in three entirely different divisions, we compare each of CPH’s divisions with different sets of relevant industry peers. We have employed three parameters – EV/EBITDA, P/S, and P/E – to analyse the relative valuation of the Group. CPH currently trades at a P/S multiple of 0.7x (CY2022E), a significant 60% discount to the weighted average multiple of division peers.

All the three divisions are expected to report improved net sales, as it was largely able to pass on the higher costs of its raw materials to its various markets across the business segments. The Paper Division was benefited by certain one-off situations that led to short term imbalance in the market, the division is expected to report improvement in profitability and register a high double-digit-million EBIT this year, but the performance will stabilize going forward. Moreover, the operating result of the Packaging Division is also expected to improve. With improvement in the bottom line at Group level along with net sales and the cost optimisation efforts are expected to offer a required boost to the company’s stock price. However, there could be some headwinds in the 2023e due to uncertain macroeconomic outlook.