Barclays downgrades UPM as fading pulp outlook leaves shares without a catalyst

Investing.com -- Barclays downgraded UPM Kymmene Oyj to Equal Weight from Over Weight, saying the absence of a sustained pulp price recovery leaves the stock lacking a clear driver, with structural pressures across pulp and graphic paper weighing on the outlook.

The brokerage cut its price target to €22 and said mid term pulp demand is likely to grow only 0 to 2% a year, slower than the historical range, due to substitution in China, weaker end markets and trade uncertainty.

It does not expect a lasting pulp rally as new capacity additions in China, Indonesia and Brazil continue to cap prices.

Barclays said UPM’s graphic paper business remains under strain despite capacity cuts, with utilisation near 70% and pricing still pressured. It expects some fixed cost savings in 2026 to 2027 but does not see earnings in communication papers returning to pre pandemic levels.

The firm added that UPM is likely to prioritise bolt on acquisitions in advanced materials over higher shareholder returns, limiting near term appeal.

Barclays upgraded SCA to Equal Weight with a SEK115 target, saying the stock now reflects its fundamentals after a period of underperformance. It highlighted SCA’s stronger margins in containerboard and wood products, lower pulp production costs versus Finnish, US and Canadian peers and a step up in free cash flow from 2026 as capex eases.

The bank said SCA’s balance sheet remains solid and could support further shareholder payouts, while lower cost mills position it to gain share if high cost producers shut capacity.

Stora Enso and Holmen were maintained at Equal Weight, with the latter’s price target trimmed to SEK315.

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