International Paper Company
IP Details
International Paper Company (NYSE: IP) is a global manufacturer of renewable fiber-based packaging, pulp, and paper, having manufacturing operations in North America, Latin America, Europe, North Africa, and Europe. The company's three primary segments are Industrial Packaging, Global Cellulose Fibers, and Printing Papers.
Latest News:
- Quarterly Dividend: On January 11, 2022, the company declared a quarterly dividend of USD 0.4625 per common share for Q1FY22, payable on March 15, 2022, to shareholders of record on February 18, 2022.
FY21 Results:
- Growth in Topline: The company reported a YoY 10.24% growth in net sales to USD 19.36 billion in FY21 (ended December 31, 2021) from USD 17.57 billion in FY20, attributable to 9.57% growth in the Industrial Packaging segment.
- Surge in Profitability: In FY21, IP's net income increased to USD 1.75 billion from USD 482 million in FY20.
- Cash and Debt Position: The company had USD 1.54 billion in cash and cash equivalents (including current investments) as of December 31, 2021, and total debt of USD 5.58 billion.
Key Risk:
- Competition Risk: IP competes with both domestic and international players. As a result, competitors' improved product development, operational efficiencies, and price strategies may affect its financials.
- Weather Risk: Climate change and local meteorological conditions may impact the company's and its suppliers' operational success.
- Cyclical Industry: The company operates in the container and packaging industry, affected by economic cycles and changing consumer preferences. These factors may reduce demand for the company's products, lowering the average selling price (ASP).
Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation:
IP's stock price has fallen 26.37% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 40.86 to USD 61.80. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 52.07.
Considering the significant correction in the stock price, solid topline and bottomline performance, steady dividend yield, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 42.05, up 1.89% as of March 02, 2022, at 12:58 PM ET.
Three-Year Technical Price Chart (as of March 02, 2022, at 12:58 PM ET). Source: REFINITIV, Analysis by Kalkine Group
Technical Analysis Summary:
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
IPG Photonics Corporation
IPGP Details
IPG Photonics Corporation (NASDAQ: IPGP) develops and manufactures high-performance fiber lasers, fiber amplifiers, and diode lasers for various applications. For multiple markets and applications, it also offers laser-based and non-laser-based solutions. Materials processing, communications, medicine, and sophisticated applications are among the applications for which the company's laser technologies are used. It distributes worldwide to original equipment manufacturers (OEMs), system integrators, and end-users. The United States, Germany, Russia, and Belarus are the company's key production locations.
FY21 Results:
- Double-Digit Growth in Topline: The company reported YoY growth of 21.66% in net sales to USD 1.46 billion in FY21 (ended December 31, 2021) from USD 1.20 billion in FY20.
- Surge in Profitability: In FY21, IPGP's net income surged to USD 277.87 million from USD 160.34 million in FY20.
- Cash and Debt Position: As of December 30, 2021, the company had USD 1.51 billion in cash and cash equivalents (including short-term investments) and total debt of USD 34.16 million.
Key Risk:
- Customer Concentration Risk: In FY20, FY19, and FY18, IPGP's five largest clients contributed 24%, 21%, and 26% of net sales, respectively. Loss of any one of such clients could harm the company's financials.
- Reduction in ASPs: Due to new product and technical innovation, increased competition, and pricing pressures from crucial customers, IPGP's goods are experiencing and may continue to undergo a considerable fall in Average Selling Prices (ASPs).
Outlook:
- Q1FY22 Estimates: As of FY21, IPGP expects Q1FY22 revenue to range between 320 – 350 million, together with diluted EPS of USD 0.85 – 1.15.
- FY22 Estimates: The company expects a moderate total revenue growth rate of 3 - 6% in FY22, multiplying non-cutting applications. It anticipates double-digit total revenue growth in the medium to long term.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation:
IPGP's stock price has fallen 30.43% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 119.33 to USD 241.43. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 147.88.
Considering the significant correction in the stock price, market dominance in the Laser Fiber Technology space, encouraging outlook, strong balance sheet, solid profitability margins, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 120.60, down 0.76% as of March 02, 2022, at 10:24 AM ET.
Three-Year Technical Price Chart (as of March 02, 2022, at 10:24 AM ET). Source: REFINITIV, Analysis by Kalkine Group
Technical Analysis Summary:
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
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