Pack­ag­ing sell-off ‘way over­done’

Struc­tural growth in the on­line shop­ping in­dus­try re­mains a key driver of stock re-rat­ings

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AN­A­LYSTS HAVE launched a ro­bust de­fence of the Euro­pean pack­ag­ing sup­pli­ers af­ter a steep de­cline in the three key Lon­don-quoted stocks. An­a­lysts at stock­bro­ker Davy called the sec­tor sell-off ‘way over­done.’

DS Smith (SMDS), Smur­fit Kappa (SKG) and Mondi (MNDI), the largest of the three Lon­don-listed pack­agers, have all posted dou­ble-digit share price de­clines since the sum­mer. Re­ported weak­en­ing prices for con­tainer­board is widely seen as the cause.

Con­tainer­board is the cor­ru­gated card­board wrap­ping used by Ama­zon and thou­sands of other on­line re­tail­ers to pro­tect pack­ages sent out to cus­tomers.

But Davy’s own chan­nel checks sug­gest that any pric­ing dips have been short-term and, as we head to­wards the vi­tal Christ­mas sales bo­nanza, are likely to re­verse.

‘If any­thing, the sec­tor should have re-rated to re­flect the im­prove­ment in longer-term growth dy­nam­ics driven by these struc­tural fac­tors [on­line shop­ping] as well as the pos­i­tive earn­ings mo­men­tum that is likely to con­tinue well into 2019,’ says Davy’s Barry Dixon and Flor O’Donoghue. (SF)

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