CPH Chemie + Papier : Event update 17 November 2022

This report has been issued for information purposes only and is not intended to constitute investment advice. It is based on estimates and forecasts of third parties regarding revenues, earnings and business developments. Such estimates and forecasts cannot be independently verified by reason of the subjective character. CPH Chemie + Papier Holding AG gives no guarantee, representation or warranty and is not responsible or liable as to its accuracy and completeness.

This report is not a prospectus within the meaning of art. 652a CO or art. 27 et seq. of the SIX Listing Rules. This document is neither an advice on investment, nor a recommendation or invitation for purchasing, holding or selling any securities, money market instruments or derivatives and no investment decision should be based on this report. This report speaks as of its date. Neither CPH Chemie + Papier Holding AG nor Dynamics Group AG assume any responsibility to up-date the report.

CPH Chemie + Papier Holding AG

Switzerland | Industrial Goods & Services

Event Update

17 November 2022

Company Data

Price:	CHF 75.60
Market Cap:	CHF 453.6mn
Free Float:	56.9%
No. of shares:	6.0mn
Avg. traded volume (30 day):	1417
Bloomberg:	CPHN SW
Reuters:	CPHN-EB
ISIN:	CH0001624714

Source: SIX Swiss Exchange and Bloomberg

Share Price Development

115
100
85
70
Nov-21	Feb-22	May-22	Aug-22	Nov-22
		CPH	SPI

Source: Bloomberg

Key Financial Data

	2020	2021	2022E	2023E
Sales	445.2	496.7	737.8	671.7
EBITDA %	12.4%	5.2%	17.0%	11.9%
EBIT %	5.5%	(0.5%)	14.4%	8.7%
Net Margin %	10.5%	(30.5%)	13.1%	7.1%
Basic EPS	7.82	(25.26)	16.13	7.94
Diluted EPS	7.82	(25.26)	16.13	7.94
DPS	1.80	1.30	1.30	2.50
Equity Ratio %	66.8%	55.2%	59.3%	62.9%
Capex	(13.5)	(19.4)	(51.6)	(28.9)
P/Sales	1.0x	0.9x	0.6x	0.0x
P/E	9.2x	NM	4.5x	9.2x
EV/EBITDA	8.4x	18.1x	3.6x	5.7x

Source: Research Dynamics, Company data

Next Events

Baader Helvea Conference	11 Jan 2023
FY 2022 report	21 Feb 2023
Annual General Meeting	14 Mar 2023

Analysts

Doris Rudischhauser [e-mail]

Alexandre Müller [e-mail]

Tel: [phone]

www.researchdynamics.ch

Strong volumes and higher realizations lifts CPH's profitability

FY2022 guidance raised again with group EBIT guided above CHF 100 million

CPH Group yet again lifted the FY2022 guidance on continued strength in volumes and realization, which was led by strong demand and in part resulted from an increase in the price of raw materials. The company now expects net sales for FY2022 to be well over CHF 700 million.

The upward revision in guidance is led by the Paper Division, which is projected to report highest sales growth taking revenue close to ~CHF 400 million for the year. The division is also expected to report annual EBIT in the high double-digit millions. Further, the Chemistry and Packaging divisions could witness double-digit million operating results, which will further aid the Group in achieving the Group EBIT of more than CHF 100 million in FY2022. The net group result for the year is projected to reach around CHF 100 million, barring any unforeseen new variables.

Other Highlights

The CPH Group stated in the summer of 2021 that it would be supplying water and electricity to the Schilliger Holz AG and proposed a new wood-fiber insulation board manufacturing facility on land owned by Perlen Papier AG at its Perlen location. The planned project is no longer feasible because of the sharp rises in energy prices.

Valuation and conclusion

We value CPH using DCF and relative valuation techniques. Our intrinsic value of CHF 98.6 per share (higher than our last estimated target price of CHF 97.7 per share) implies an upside of ~30% from current levels. For relative valuation, since the Group operates in three entirely different divisions, we compare each of CPH's divisions with different sets of relevant industry peers. We have employed three parameters - EV/EBITDA, P/S, and P/E - to analyse the relative valuation of the Group. CPH currently trades at a P/S multiple of 0.7x (CY2022E), a significant 60% discount to the weighted average multiple of division peers.

All the three divisions are expected to report improved net sales, as it was largely able to pass on the higher costs of its raw materials to its various markets across the business segments. The Paper Division was benefited by certain one-off situations that led to short term imbalance in the market, the division is expected to report improvement in profitability and register a high double-digit-million EBIT this year, but the performance will stabilize going forward. Moreover, the operating result of the Packaging Division is also expected to improve. With improvement in the bottom line at Group level along with net sales and the cost optimisation efforts are expected to offer a required boost to the company's stock price. However, there could be some headwinds in the 2023e due to uncertain macroeconomic outlook.

Important disclosures are on the last page of this report. CPH Chemie + Papier Holding AG is a research client of Research Dynamics. The equity research reports are prepared for information purposes only.

CPH

2

Switzerland | Industrial Goods & Services

Exhibit 1: CPH - Comparison with division peers

Company

EV/EBITDA

P/S

P/E

3 year

3 year

3 year

average

CY2022E

CY2023E

average

CY2022E

CY2023E

average

CY2022E

CY2023E

CPH Chemie & Paper

6.1x

4.0x

5.4x

0.8x

0.7x

0.7x

10.5x

5.6x

8.6x

Paper peers:

Holmen

NA

8.3x

12.4x

NA

3.0x

3.3x

NA

12.3x

19.9x

Stora Enso

7.9x

5.4x

6.7x

1.0x

1.0x

1.0x

13.7x

8.1x

11.4x

Altri Sgps

7.1x

5.3x

7.5x

1.7x

1.1x

1.4x

10.0x

6.7x

11.0x

Metsa Board

11.4x

4.8x

5.9x

1.2x

1.1x

1.1x

14.0x

6.5x

8.4x

Upm-Kymmene

8.5x

9.5x

9.1x

1.4x

1.6x

1.5x

12.8x

11.7x

11.8x

Norske Skogindustrier

10.8x

NA

NA

NA

NA

NA

2.8x

NA

NA

Cropper (James)

16.8x

0.1x

0.1x

1.3x

NA

NA

35.3x

30.1x

15.7x

Oji Holdings Corp

8.4x

965.0x

925.6x

0.4x

0.3x

0.3x

13.5x

6.2x

6.5x

Chemistry peers:

Honeywell Int.

13.0x

17.7x

16.3x

2.8x

4.0x

3.9x

21.0x

24.5x

23.1x

Clariant

10.9x

7.3x

7.5x

1.4x

1.0x

1.0x

33.0x

13.9x

14.1x

Arkema

6.1x

4.3x

5.7x

0.8x

0.6x

0.6x

12.6x

5.5x

9.1x

Chemours Co/The

14.4x

5.3x

5.7x

2.4x

0.7x

0.7x

30.3x

6.5x

7.0x

Packaging peers:

Macfarlane Group Plc

10.5x

0.1x

0.1x

0.7x

NA

NA

16.7x

8.8x

8.6x

Gerresheimer Ag

10.5x

9.5x

8.3x

1.6x

1.2x

1.1x

25.2x

14.6x

12.7x

West Pharmaceutical Services

24.7x

20.0x

20.4x

5.3x

6.2x

6.1x

41.9x

29.2x

31.7x

Convertidora Industrial Sa-A

5.0x

NA

NA

0.3x

NA

NA

41.9x

NA

NA

Psb Industries

4.7x

NA

NA

0.3x

NA

NA

15.3x

NA

NA

Astrapak Ltd-Uts

NA

NA

NA

NA

NA

NA

NA

NA

NA

Bilcare Ltd

34.4x

NA

NA

NA

NA

NA

6.9x

NA

NA

Median

10.5x

6.3x

7.5x

1.3x

1.1x

1.1x

15.3x

10.2x

11.6x

High

34.4x

965.0x

925.6x

5.3x

6.2x

6.1x

41.9x

30.1x

31.7x

Low

4.7x

0.1x

0.1x

0.3x

0.3x

0.3x

2.8x

5.5x

6.5x

Premium (disc) to peers

(42%)

(37%)

(29%)

(37%)

(42%)

(36%)

(31%)

(46%)

(26%)

Source: Bloomberg and Thomson Eikon (as on 16 Nov 2022)

Exhibit 2: CPH - Comparison with weighted average of division peers

			EV/EBITDA			P/S			P/E
		3 year			3 year			3 year
		average	CY2022E	CY2023E	average	CY2022E	CY2023E	average	CY2022E	CY2023E
	Weighted peer multiples	12.1x	75.9x	73.7x	1.5x	1.8x	1.8x	20.4x	13.2x	13.7x
	CPH	6.1x	4.0x	5.4x	0.8x	0.7x	0.7x	10.5x	5.6x	8.6x
	Premium (disc) to peers	(49%)	(95%)	(93%)	(47%)	(64%)	(61%)	(49%)	(58%)	(37%)

Source: Bloomberg and Thomson Eikon (as on 16 Nov 2022)

CPH 3

Switzerland | Industrial Goods & Services

DETAILED FINANCIAL STATEMENTS

Income Statement FY2022

CHF mn (except per share)	1H22E	2H22E	FY22E
Chemistry sales	56	58	114
Paper sales	188	214	402
Packaging sales	116	106	222

Net Sales	360	378	738
Cost of Sales	(229)	(226)	(449)
Gross profit	140	152	289
Personnel cost	(50)	(51)	(102)
Outsourced maintenance/repairs	0	(25)	(25)
Other operating expense	(28)	(9)	(37)
Total operating costs	(79)	(85)	(164)
EBITDA	62	67	125
Depreciation	(10)	(8)	(18)
Amortisation	0	(1)	(1)
Operating profit (EBIT) before impairment	52	54	106
Impairment	0	0	0
Operating profit (EBIT)	52	54	106
Finance costs	(1)	(1)	(2)
Finance income	0	0	0
Total financial income (expenses)	(1)	(1)	(2)
Profit before taxes (before exceptional items)	50	53	104
Non-operating items	(2)	0	0
Income taxes	(1)	(5)	(7)
Profit attributable to the parent	47	48	97
Basic EPS	7.9	8.2	16.1
Diluted EPS	7.9	8.2	16.1
Source: Research Dynamics, Company data

Income Statement

	CHF mn (except per share)		FY17		FY18		FY19		FY20			FY21		FY22E		FY23E
	Chemistry sales	75		79	78		73		95		114	116
	Paper sales		264		301		293		210			231		402		344
	Packaging sales	130		153	153		162		171		222	212
	Net Sales		470		534		525		445			497		738		672
	Cost of Sales	(309)	(311)	(298)	(255)	(336)	(449)	(419)
	Gross profit		161		222		227		190			161		289		252
	Personnel cost	(84)	(92)	(93)	(93)	(92)	(102)	(109)
	Outsourced maintenance/repairs		(17)		(19)		(20)		(17)			(18)		(25)		(27)
	Other operating expense	(26)	(28)	(26)	(25)	(25)	(37)	(37)
	Total operating costs		(127)		(139)		(139)		(135)			(135)		(164)		(173)
	EBITDA	34		83	88		55		26		125	80
	Depreciation		(30)		(30)		(30)		(29)			(27)		(18)		(20)
	Amortisation	(1)		(1)	(1)		(1)		(1)		(1)	(1)
	Operating profit (EBIT)		3		52		57		25			(3)		106		58
	before impairment
	Impairment	0		0	0		0		(150)	0	0
	Operating profit (EBIT)		3		52		57		25			(153)		106		58
	Finance costs	(8)		(7)	(6)		(5)		(5)		(2)	(2)
	Finance income		2		1		0		0			1		0		0
	Total financial income	(7)		(6)	(6)		(5)		(4)		(2)	(2)
	(expenses)
	Profit before taxes (before		(4)		46		51		20			(157)		104		56
	exceptional items)
	Non-operating items	23		0	1		19		7		0	0
	Income taxes		(3)		(3)		(3)		8			(2)		(7)		(8)
	Profit attributable to the	16		42	48		47		(152)		97	48
	parent
	Basic EPS		2.7		7.1		8.1		7.8			(25.3)		16.1		7.9
	Diluted EPS	2.7		7.1	8.1		7.8		(25.3)		16.1	7.9
	DPS		0.7		1.8		1.8		1.8			1.3		1.3		2.5

Source: Research Dynamics, Company data

															CPH	4
				Switzerland | Industrial Goods & Services
		Balance Sheet
		CHF mn		FY17		FY18		FY19			FY20		FY21		FY22E		FY23E
		Assets
		Non-current assets
		PPE	384.1	376.1	366.4	352.6	196.5	228.5		235.9
		Intangible assets		4.8		5.8		5.6			5.6		5.8		6.0		6.1
		Long-term financial assets	10.0	10.0	10.0	10.0	10.0	10.0		10.0
		Long-term financial receivables		0.0		0.0		0.0			0.0		0.0		0.0		0.0
		Other non-current assets	56.4	55.3	54.0	64.8	58.4	58.4		58.4
		Total non-current assets		455.3		447.2		436.0			432.9		270.7		302.8		310.4
		Current assets
		Inventories		59.2		69.6		78.5			78.3		87.5		103.1		99.7
		Trade accounts receivable	77.8	72.1	72.4	52.9	69.3	78.8		73.6
		Other receivables		18.0		13.1		14.0			17.2		28.5		28.5		28.5
		Prepaid expenses and accrued	7.0	9.2	8.6	6.7	9.2	9.2		9.2
		income
		Short-term financial receivables		0.0		100.3		0.0			0.0		0.1		0.1		0.1
		Liquid funds and Securities	80.2	89.0	93.1	116.3	95.1	148.6		165.8
		Total assets		697.6		800.5		702.7			704.2		560.4		671.1		687.3
		Shareholders' Equity and Liabilities
		Share capital		30.0		12.0		12.0			1.2		1.2		1.2		1.2
		Capital reserves	0.8	15.0	4.2	4.2	(0.1)	(0.1)		(0.1)
		Profit reserves		346.4		336.2		375.2			418.5		459.5		300.2		382.0
		Net result for the year	16.0	42.3	48.3	46.9	(151.6)	96.8		47.6
		Non-current liabilities
		Long-term financial liabilities	143.5	120.5	116.8	109.7	106.6	102.7		98.8
		Pension scheme liabilities		0.6		1.3		0.7			1.2		1.4		1.4		1.4
		Other long-term liabilities	0.0	0.8	0.6	0.4	0.3	0.3		0.3
		Long-term provisions		51.8		50.0		47.5			31.5		24.1		24.1		24.1
		Current liabilities
		Trade accounts payable		69.5		69.7		66.3			56.8		84.8		110.3		97.7
		Other payables	3.3	4.1	3.6	4.6	3.9	3.9		3.9
		Accrued liabilities and deferred		17.2		20.0		16.3			16.8		18.3		18.3		18.3
		income
		Short-term financial liabilities	9.8	125.8	5.9	8.1	3.2	3.1		3.0
		Short-term provisions		5.6		1.2		3.8			3.3		7.4		7.4		7.4
		Total liabilities	301.3	393.3	261.4	232.4	249.9	271.5		254.9
		Total equity and liab.		697.6		800.5		702.7			704.2		560.4		671.1		687.3

Source: Research Dynamics, Company data

Cash Flow Statement

CHF mn

Net profit for the period Non-cash adjustments:

Change in CA and CL: (Increase)/ decrease in inventories

Decrease in trade accountsreceivable

Increase/ (decrease) in trade accounts payable Other changes in working capital

CFO

Investments in tangible fixed assets

Disposals of tangible fixed assets

Investments in intangible assets

Sale of subsidiary/ Divestiture of interests Investments in business activities

Repayment of long-term financial receivables

CFI

Increase/ (Decrease) in short-term financial liabilities and receivables Increase/ (Decrease) in long-term financial liabilities

Increase in other long- term liabilities Dividends to shareholders

CFF

Exchange (losses)/gains

Net change in cash

Opening cash balance

Closing cash balance

FY17	FY18	FY19	FY20	FY21	FY22E	FY23E
16.2	42.3	48.5	47.0	(151.4)	96.9	47.8
(1.5)	26.3	31.2	(2.2)	169.5	19.4	21.4
13.6	(8.6)	(10.2)	(4.1)	(9.6)	(15.5)	3.4
(7.7)	5.0	(1.3)	20.5	(15.5)	(9.6)	5.2
15.8	(1.1)	(2.8)	(9.0)	30.7	25.6	(12.6)
(4.2)	0.4	(4.3)	2.8	(7.9)	0.0	0.0
32.2	64.3	61.0	55.0	15.8	116.8	65.1
(32.3)	(22.3)	(21.9)	(17.5)	(23.0)	(50.1)	(27.4)
15.4	6.3	0.8	5.2	5.2	0.0	0.0
(2.4)	(2.2)	(1.0)	(1.3)	(1.6)	(1.5)	(1.5)
0.0	0.0	0.0	0.1	0.2	0.0	0.0
0.0	(27.9)	0.0	(1.6)	0.0	0.0	0.0
0.0	0.0	100.9	(0.3)	(0.1)	0.0	0.0
(19.3)	(46.0)	78.9	(15.3)	(19.2)	(51.6)	(28.9)
1.0	(4.3)	(123.4)	(4.4)	(6.9)	(0.1)	(0.1)
(0.6)	(3.0)	(1.1)	0.0	0.0	(3.9)	(3.9)
0.2	2.1	(0.2)	(0.4)	(0.3)	0.0	0.0
(3.9)	(3.9)	(10.9)	(10.8)	(10.8)	(7.8)	(15.0)
(3.3)	(9.1)	(135.6)	(15.6)	(18.0)	(11.8)	(19.0)
0.2	(0.3)	(0.2)	(0.9)	0.2	0.0	0.0
9.8	8.9	4.1	23.2	(21.2)	53.5	17.2
70.3	80.1	89.0	93.1	116.3	95.1	148.5
80.1	89.0	93.1	116.3	95.1	148.5	165.8