Mondi PLC (LSE:MNDI) shares climbed 3% after JP Morgan upgraded the packaging group to ‘Overweight’, pointing to signs of a recovery in key paper markets and a more attractive valuation.
The bank cited several reasons for the improved view, including stabilising conditions in the containerboard market and signs of upside in kraft paper pricing.
Crucially, JPM believes the cycle of earnings downgrades is coming to an end, with consensus estimates now looking more realistic.
The broker also sees longer-term value: its through-the-cycle earnings analysis points to potential gains of up to 70% from current levels.
With the shares still trading on low multiples, the bank argues there is room for re-rating as sentiment improves.
The target price has been set at £14.30, implying a 20% upside from current levels. The shares rose 38p to 1,226.5p.