Pareto has downgraded its recommendation for hygiene and health company Essity to hold from buy, and lowered its target price to 270 kronor from 295 following last week's fourth-quarter report.
The analysis firm notes that the company's relative valuation compared to the broader market remains strong and that margins were solid in the report. However, they see a lack of catalysts for the stock due to limited short-term growth prospects.
"Although the results were somewhat better than expected, this was mainly due to the mix, while underlying growth remains weak. We have slightly reduced our forecasts due to weaker growth prospects," the report states.
Essity AB is one of the world's leading manufacturers of hygiene products. Net sales break down by family of products as follows:
- human care products (54.2%): incontinence products (Tena), feminine protection products (Libresse, Bodyform, Nana, Nuvenia, Saba, Nosotras, Donnasept, etc.), diapers (Libero, Up & Go, Libero-Peaudouce, Drypers, Pequenin, etc.), compresses and bandages.
- paper hygiene products (26.1%): paper towels, toilet paper, handkerchiefs, wipes, etc. sold under Tempo, Colhogar, Cozy, Cushelle, Danke, Delica, Demak Up, Favorita, Flen, Lotus, Lovly, Okay, Plenty, Regio and Zewa brands;
- professional hygiene products (19.7%): including toilet paper, handkerchiefs, hand lotions and hand soaps, hand sanitizers, as well as cleaning and wiping products.
At the end of 2024, the group operated around 70 production sites in the world.
Net sales are distributed geographically as follows: Europe (60.2%), Latin America (17.5%), North America (16.9%), Asia (1.7%), and others (3.7%).
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