Broker tips: Mondi, Rathbone Brothers, Beazley

(Sharecast News) - Credit Suisse cuts its price target on Mondi shares to 1,940.0p from 2,150.0p to reflect the paper and packaging group's decision to divest its high-margin Russian operations. Credit Suisse said the Russia divestiture due to the Ukraine war was "a major setback" for Mondi.

In its 2022-2024 forecast period, it estimates it would remove around €360.0m from annual EBITDA, €185.0m from free cash flow and €0.50 from earnings per share, reduce the potential for high-return growth investments, and lower sustainable group margins by around 110 basis points.

"In our DCF valuation the equity value of Mondi declines 22% versus steady state, reflected in our lowered price target. Removing Russia from our valuation of the share is partially offset by our upgraded underlying earnings estimates, limiting the reduction of our target price to 10%," the bank said.

At the first-half results due in August, Credit Suisse said it sees slowing demand and a potential loss of pricing power as the main risks to its earnings estimates, target price and 'outperform' rating.

Barclays downgraded Rathbone Brothers to 'equalweight' from 'overweight' on Monday, arguing that despite a robust medium-term outlook, flows were likely to remain subdued for the remainder of the year, given pressure on key asset classes.

"This is likely to weigh on consensus estimates," the bank said. "Meanwhile, Rathbones' stark re-rating versus peers has removed the stock's clear valuation discount."

Barclays also maintained its 2,200.0p price target on the stock.

Analysts at Berenberg slightly raised their target price on insurer Beazley from 610.0p to 630.0p on Monday, citing better growth, better rates, and better profitability.

Berenberg said it struggled to find any negatives from Beazley's first-quarter trading statement, with gross premiums growing by 27%, ahead of 17% rate increases, as the firm continued to take advantage of high rates to grow volumes, particularly across its speciality lines.

More importantly, Berenberg acknowledged that management had reiterated its full-year combined ratio guidance of roughly 90%, despite $50.0m of losses expected as a result of the war in Ukraine.

In fact, the German bank stated management actually went "a step further", saying that its aviation exposure was manageable and no scenarios were material enough to warrant changing the full-year guidance.

"While full clarity on ultimate aviation losses will take a while to emerge, in our view, these comments are very reassuring and should significantly alleviate investor concerns," said Berenberg, which also reiterated its 'buy' rating on the stock.