yale.app.box.com Open in urlscan Pro
74.112.186.144  Public Scan

Form analysis
0 forms found in the DOM

Text Content

JavaScript is currently disabled in your browser. You must have JavaScript
enabled to take full advantage of Box.
Switch to the accessible version of Box ›
IP Yale & Russia Note 4.19.2022.pdf
DownloadSign up
Log in
 1. 1
    
 2. 2
    
 3. 3
    
 4. 4
    
 5. 5
    
 6. 6
    
 7. 7
    
 8. 8
    

April 19, 2022International PaperIP-NYSERatingOutperformPrice:
Apr-19$48.65Target$60.00Total Rtn27%International Paper & Russia: Is Yale’s
AssessmentFair?Bottom Line:In a recent (4/7) New York Times editorial, Jeffrey
Sonnenfeld, Professor at Yale’s Schoolof Management, and Steve Tian, research
director at Yale’s Chief Executive LeadershipInstitute, placed International
Paper in the lowest of five categories for assessingcorporate responses to the
Russian invasion of Ukraine. In the accompanying text, IPwas singled-out for a
particularly “timid” response around its Russian investments. Itis a painful
public rebuke, particularly for a company that has made much of
corporatereputation and ethics. Is it a fair assessment?Key PointsIP has a
larger, more complicated and capital-intensive Russian position thanmost other
corporates on Yale’s list. IP’s sole asset is a 50% joint venture stake inIlim,
Russia’s largest pulp & paper company. Ilim is a 50/50 JV with oligarch,
ZakharSmushkin. Because of the structure, IP is constrained in its options
around idling the Ilimmills or exiting its stake. In addition, Ilim is highly
dependent on the goodwill of theRussian government. We have little doubt about
the intent to exit. The issues are: How?How quickly? How to get the capital
out?At the same time, we do share Yale’s assessment about the “timid” nature
ofIP’s response to Russian events. We’ve found IP’s comments cautious and
oblique inaddressing the current situation. No other company in our coverage has
been as heavilyinvested in Russia over the past 25 years. It has placed itself
in a bad situation. Suffice itto say, ‘Russia has always been lucrative, it has
never been easy.’In addition, from our review of public data, IP’s senior
management has beenunusually “engaged” with Russian business and political
leaders over thepast several years. Have these relationships had any role
tempering IP’s response?Through early March, Chairman & CEO Mark Sutton’s
official IP biography listed just twointernational affiliations: Chairman of
U.S.-Russia Business Council and InternationalAdvisory Board for the Moscow
School of Management, SKOLKOVO.Bottom Line? IP will need to work its way out of
a difficult situation. Given thecomplexity, we’re willing to give it leeway. It
appears clear that IP will permanently exitRussia — despite the lack of a clear
statement to that effect. At the same time, both theboard and the senior
leadership need to engage in some serious self-reflection.Packaging & PaperMark
Wilde, Ph.D.Analystmark.wilde@bmo.com(212) 883-5102Jesse Barone,
CFAAssociatejesse.barone@bmo.com(212) 885-4069Anojja ShahSenior
Associateanojja.shah@bmo.com(312) 845-2081Legal Entity:BMO Capital Markets
Corp.706050403020AprOctAprOct151050LHS: Price ($) / RHS: Volume (mm)Source:
FactSet2YR Price Volume ChartCompany Datain $Dividend$1.85Yield3.8%EV
(mm)$18,997Shares O/S (mm)374.9Market Cap (mm)$18,238Net Debt (mm)$4,284BMO
Estimatesin
$(FY-Dec.)2021A2022E2023EEPS$3.95$4.80$5.14EBITDA$3,105$3,468$3,561Revenue$21,779$21,100$21,827ND/EBITDA1.4x1.0x0.6xConsensus
Estimates2021A2022E2023EEPS$4.47$4.79Valuation2021A2022E2023EEV/EBITDA6.1x5.5x5.3xFCF
Yield (%)9.7%10.3%11.4%P/E12.3x10.1x9.5xQTR.
EPSQ1Q2Q3Q42021A$0.76$1.06$1.35$0.782022E$0.47$1.17$1.54$1.632023E$1.15$1.30$1.37$1.32Our
ThesisA combination of strong box demand and risingcontainerboard prices is
boosting earnings and margins.Pulp pricing and demand has improved.For
disclosure statements, including the Analyst Certification, please refer to
page(s) 5 to 8.
International Paper - Block Summary ModelIncome
Statement2021A2022E2023ERevenue$21,779$21,100$21,827EBITDA$3,105$3,468$3,561Depreciation
& Amortization1,2101,1441,132Operating Income1,8952,3242,429Interest
Expense(318)(290)(280)Pre-Tax Income1,7832,0342,149Net
Income1,7521,8361,950Adjusted EPS$3.95$4.80$5.14Cash Flow
Statement2021A2022E2023ECash Flow From Operations2,0302,9603,078Change in
Working Capital(426)(20)(4)Capex(549)(1,100)(1,000)Free Cash
Flow1,7771,8822,078Dividends(780)(705)(698)Share Repurchases(839)(440)0Balance
Sheet2021A2022E2023ECash1,2952,0103,390Current
Assets7,0967,7589,248Goodwill3,1303,1303,130Total
Assets25,24325,86127,219Current Liabilities4,1444,0724,177Total
Debt5,5795,5795,579Total Liabilities16,16116,08916,194Shareholders'
Equity9,0829,77311,025Source: BMO Capital Markets, Company ReportsValuationOur
$60 target price is based on 7.9x our 2022E EBITDA andYE21 net debt. We also
include after-tax pension liability andthe Ilim JV.Upside Scenario$72.00Our
upside share price of $72 is based on 7.9x our estimatedupside EBITDA of
$3.8B.Downside Scenario$41.00Our downside share price of $41 is based on 7.7x
ourestimated downside EBITDA of $2.36B.-16%+48%+23%TargetPrice60.00in
USDCurrentPrice48.65DownsideScenario41.00UpsideScenario72.00Key
CatalystsDemand/prices of key commodities — containerboard andpulp.Company
DescriptionInternational Paper is a diversified pulp and paper-basedpackaging
company with leading global market positions.IP's core products include
containerboard and corrugatingpackaging, followed by a much smaller position in
marketpulp.IP-NYSEResearchGlossaryCompanyModelsInternational Paper | Page 2April
19, 2022










1 / 8
125%



Drop files on this page to upload them into this folder.