UBS has downgraded paper and packaging group Mondi PLC (LSE:MNDI) to 'neutral' from ' buy ', citing persistent cost pressure and the prospect of a weak second quarter, and cut its price target by 23%.
The bank lowered its target to 750p from 970p, against a current share price of 703p.
Analyst Andrew Jones said Mondi faced rising costs for central European pulpwood and recovered fibre, leaving it at a relative disadvantage to Nordic peers.
He added that the delayed reopening of the Strait of Hormuz suggested costs would remain elevated through the third quarter.
UBS cut its 2026 earnings before interest, tax, depreciation and amortisation estimate by 12%, with its 2027 and 2028 forecasts reduced by 11% and 9%.
The bank now sits below consensus across all three years.
Although Mondi has pushed through price increases for kraftliner, testliner and kraft paper since February lows, UBS expects the benefit to be felt more materially in the second half.
Jones flagged the second-quarter results, due on 30 July, as a negative catalyst.
He said price rises were too early to offset cost increases in the quarter, with higher maintenance spending and a forestry valuation loss adding to the pressure.
UBS estimates second-quarter earnings of €157 million, leaving first-half earnings of €369 million, below consensus of €398 million.
The bank also pointed to more than 1.2 million tonnes of new containerboard supply due in the second half, which it expects to push prices lower.
UBS said Mondi's recent capital spending provided a strong platform for growth once demand recovered and pricing power returned, pointing to long-term free cash flow yields close to 10%.
But Jones said the market remained at least a year away from a meaningful improvement in European containerboard operating rates.
UBS values the shares on a blend of discounted cash flow and a target multiple of seven times forecast 2027 earnings.
