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

27 Oct 2020

Company Data

Price:

CHF 65.0

Market Cap:

CHF 390.0mn

Free Float:

41.6%

No. of shares:

6.0mn

Avg. traded volume (30 day):

275

Bloomberg:

CPHN SW

Reuters:

CPHN-EB

ISIN:

CH0001624717

Source: SIX Swiss Exchange and Bloomberg

Share Price Development

120

110

100

90

80

70

60

50

Oct-19

Dec-19

Feb-20

Apr-20

Jun-20

Aug-20

Oct-20

CPH

SPI

Source: Bloomberg

Key Financial Data

2018

2019

2020E

2021E

Sales

533.5

524.7

433.4

458.8

EBITDA %

15.6%

16.8%

11.7%

11.1%

EBIT %

9.7%

10.8%

4.6%

4.4%

Net Margin %

7.9%

9.2%

9.3%

3.6%

Basic EPS

7.05

8.06

6.69

2.72

Diluted EPS

7.05

8.06

6.69

2.72

DPS

1.80

1.80

1.80

1.80

Equity Ratio %

50.7%

62.6%

66.5%

66.6%

Capex

(18.2)

(22.0)

(20.9)

(31.4)

P/Sales

0.7x

0.8x

0.9x

0.9x

P/E

9.4x

8.2x

9.9x

24.4x

EV/EBITDA

5.4x

5.1x

8.8x

8.8x

Source: Research Dynamics, Company data

Next Events

ZKB Equity Conference 2020 in

4 Nov 2020

Zurich

Baader Helvea Swiss equities

14 Jan 2021

conference in Bad Ragaz

Analysts

Doris Rudischhauser dru@researchdynamics.ch

Alexandre Müller amu@researchdynamics.ch

Tel: +41 43 268 3232

www.researchdynamics.ch

Adjustments to FY20 earnings outlook

CPH Group to benefit from significant one-off effects

CHP Group yesterday announced its plans to transfer some of its Perlen site's land assets to a newly to be founded real estate subsidiary, Perlen Papier Immobilien AG. With the completion of this transaction, the group will be able to clearly distinguish between its operating and real estate activities. This transaction, which is to be executed at market values, will allow the CHP Group to offset CHF 97mn of tax losses carried forward from previous years, resulting in an expected deferred tax income of ~CHF 12mn. This amount, along with release of provisions for environmental protection measures from the Uetikon site, is expected to generate a non-recurring income totalling ~CHF 26mn for FY20e. Thus, the CPH Group now expects to report net earnings of ~CHF 40mn for FY20e as against the low-double-digit millions guidance provided earlier.

Valuation and conclusion

We value CPH using DCF and relative valuation techniques. Our intrinsic value of CHF 87.9 per share comes out the same as our previous target price (CHF 87.9), implying an upside of 35% from the previous closing price. 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 analyze the relative valuation of the Group. CPH currently trades at a P/S multiple of 0.8x (FY2021E), a significant 35% discount to the weighted average multiple of division peers.

We remain encouraged by management's focus on diversifying the offerings towards more remunerative businesses and regions. That said, in the short-term, we expect uncertainties to continue during the reminder of 2H2020 and into 2021 as economic activity is likely to pick up only gradually. Specifically, as Covid-19 has once again started resurfacing in major European countries, the Paper division may face unexpected demand pressure in 4Q20 due to potential restrictions on economic activities. Thus, the division may be affected by similar challenges than as of mid-March and into 2Q20 when demand for newsprint and magazine paper significantly. Accordingly, we have lowered our FY20e revenue forecast for the Paper division. However, in the medium to long term, as business activity is expected to pick up steam, we expect the valuation discount to narrow and the stock to witness a revaluation.

We see multiple factors driving the improvement in valuation, which includes growth prospects in key markets, operating efficiency improvements from new production facilities, and expansion of the Packaging and Chemistry divisions. The Paper division, which will be impacted in the short-term due to the weak economic environment in Europe, should benefit from local market, cost leadership, cost saving initiatives, advanced technology and continued operational improvements in the long-term. The business environment continues to remain challenging due to overcapacities and decreasing demand for newsprint paper. However, over time, tough market conditions may push marginal paper producers out of business which should lead to reduced capacities and aid a recovery in paper prices thereby benefiting efficient and leading market players like CPH. Moreover, we expect that the group-level efficiency optimization initiatives - together with the further strategy implementation of increasing presence in growth markets outside of CHF denominated cost structures and paper exposure - should offer support and upside to the company's stock price.

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

CY2020E

CY2021E

average

CY2020E

CY2021E

average

CY2020E

CY2021E

CPH Chemie & Paper

7.6x

8.4x

8.0x

0.9x

0.9x

0.8x

13.3x

16.4x

22.4x

Paper peers:

Holmen

NA

17.5x

16.7x

NA

3.5x

3.2x

NA

30.6x

28.9x

Stora Enso

8.4x

10.1x

8.5x

1.0x

1.2x

1.1x

13.3x

24.7x

15.9x

Altri

7.1x

11.6x

10.1x

1.7x

1.1x

1.1x

10.1x

96.7x

30.8x

Metsa Board

11.2x

9.2x

9.0x

1.2x

1.3x

1.3x

14.1x

16.7x

15.0x

UPM-Kymmene

8.4x

10.6x

9.2x

1.4x

1.6x

1.5x

12.9x

19.7x

16.4x

Norkse Scogindustrier

11.7x

NA

NA

NM

NA

NA

NA

NA

NA

James Cropper

15.8x

NA

NM

1.2x

NA

NA

34.4x

NA

NA

OJI Holdings

8.2x

NM

NM

0.4x

0.3x

0.3x

13.2x

10.3x

8.1x

Chemistry peers:

Honeywell Int.

13.1x

17.1x

15.5x

2.9x

3.7x

3.5x

21.0x

24.7x

21.7x

Clariant

11.4x

NA

NA

1.4x

NA

NA

33.9x

NA

NA

Arkema

6.1x

7.6x

6.8x

0.8x

0.9x

0.8x

12.8x

16.8x

12.8x

WR Grace & Co.

14.2x

11.5x

9.0x

2.3x

1.8x

1.7x

30.7x

17.8x

12.0x

Packaging peers:

Meadvestwaco

NA

NA

NA

NA

NA

NA

NA

NA

NA

MacFarlane Group

10.3x

NM

NM

0.7x

NM

NM

16.8x

14.2x

11.6x

Gerresheimer

10.9x

12.0x

11.0x

1.6x

1.9x

1.8x

24.2x

22.1x

18.7x

West Pharmaceutical Services

27.0x

39.7x

34.8x

5.9x

9.8x

8.9x

43.6x

62.4x

56.8x

Convertidora Industrial

4.8x

4.2x

3.7x

0.2x

0.2x

0.2x

41.9x

NA

NA

PSB Industries

4.8x

28.8x

4.6x

0.3x

0.3x

0.3x

15.6x

NM

NM

Astrapak Ltd

NA

NA

NA

NA

NA

NA

NA

NA

NA

Bilcare Ltd

42.2x

NA

NA

NM

NA

NA

NA

NA

NA

Median

10.9x

11.5x

9.1x

1.2x

1.3x

1.3x

16.8x

20.9x

16.2x

High

42.2x

39.7x

34.8x

5.9x

9.8x

8.9x

43.6x

96.7x

56.8x

Low

4.8x

4.2x

3.7x

0.2x

0.2x

0.2x

10.1x

10.3x

8.1x

Premium (disc) to peers

(30%)

(27%)

(13%)

(26%)

(36%)

(35%)

(21%)

(22%)

39%

Source: Thomson Eikon (as on 26 Oct 2020)

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

EV/EBITDA

P/S

P/E

3 year

3 year

3 year

average

CY2020E CY2021E average CY2020E

CY2021E

average

CY2020E

CY2021E

Weighted peer multiples

9.6x

13.6x

8.8x

1.1x

1.3x

1.2x

18.3x

21.5x

16.4x

CPH

7.6x

8.4x

8.0x

0.9x

0.9x

0.8x

13.3x

16.4x

22.4x

Premium (disc) to peers

(21%)

(38%)

(9%)

(23%)

(33%)

(30%)

NM

(24%)

36%

Source: Thomson Eikon (as on 26 Oct 2020)

CPH 3

Switzerland | Industrial Goods & Services

DETAILED FINANCIAL STATEMENTS

Income Statement

CHF mn (except per share)

FY15

FY16

FY17

FY18

FY19

FY20E

FY21E

Chemistry sales

63

69

75

79

78

72

74

Paper sales

248

246

264

301

293

200

215

Packaging sales

110

119

130

153

153

161

170

Net Sales

420

435

470

534

525

433

459

Cost of Sales

(285)

(267)

(309)

(311)

(298)

(248)

(275)

Gross profit

135

168

161

222

227

185

184

Personnel cost

(86)

(89)

(84)

(92)

(93)

(94)

(93)

Outsourced

maintenance/repairs

(16)

(18)

(17)

(19)

(20)

(16)

(16)

Other operating expense

(21)

(25)

(26)

(28)

(26)

(24)

(24)

Total operating costs

(123)

(131)

(127)

(139)

(139)

(134)

(132)

EBITDA

12

37

34

83

88

51

51

Depreciation on tangible fixed

assets

(34)

(31)

(30)

(30)

(30)

(30)

(30)

Depreciation on intangible

assets

(0)

(1)

(1)

(1)

(1)

(1)

(1)

Operating profit (EBIT)

before impairment

(22)

6

3

52

57

20

20

Impairment

0

0

0

0

0

0

0

Operating profit (EBIT)

(22)

6

3

52

57

20

20

Finance costs

(13)

(6)

(8)

(7)

(6)

(4)

(4)

Finance income

1

1

2

1

0

0

0

Total financial income

(expenses)

(12)

(5)

(7)

(6)

(6)

(4)

(4)

Profit before taxes (before

exceptional items)

(34)

1

(4)

46

51

16

16

Non-operating items

2

(4)

23

0

1

16

4

Income taxes

(1)

(4)

(3)

(3)

(3)

9

(4)

Profit attributable to the

parent

(33)

(8)

16

42

48

40

16

Basic EPS

(5.5)

(1.3)

2.7

7.1

8.1

6.7

2.7

Diluted EPS

(5.5)

(1.3)

2.7

7.1

8.1

6.7

2.7

DPS

0.6

0.7

0.7

1.8

1.8

1.8

1.8

Source: Research Dynamics, Company data

Balance Sheet

CHF mn

FY15

FY16

FY17

FY18

FY19

FY20E

FY21E

Assets

Non-current assets

PPE

404.3

384.6

384.1

376.1

366.4

356.5

357.2

Intangible assets

2.4

3.1

4.8

5.8

5.6

5.6

5.6

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

20.2

52.6

56.4

55.3

54.0

54.0

54.0

Total non-current assets

436.9

450.3

455.3

447.2

436.0

426.1

426.8

Current assets

Inventories

54.5

68.9

59.2

69.6

78.5

72.8

76.3

Trade accounts receivable

66.4

69.1

77.8

72.1

72.4

67.8

74.5

Other receivables

8.0

8.9

18.0

13.1

14.0

12.0

12.0

Prepaid expenses and accrued

4.9

4.8

7.0

9.2

8.6

20.6

20.6

income

Short-term financial receivables

0.0

0.1

0.0

100.3

0.0

0.0

0.0

Liquid funds and Securities

53.2

70.4

80.2

89.0

93.1

106.2

101.9

Total assets

624.0

672.4

697.6

800.5

702.7

705.6

712.2

Shareholders' Equity and Liabilities

Share capital

30.0

30.0

30.0

12.0

12.0

12.0

12.0

Capital reserves

8.4

4.8

0.8

15.0

4.2

4.2

4.2

Profit reserves

397.4

351.2

346.4

336.2

375.2

412.7

442.1

Net result for the year

(33.1)

(7.9)

16.0

42.3

48.3

40.1

16.3

Non-current liabilities

Long-term financial liabilities

126.5

145.6

143.5

120.5

116.8

110.8

107.0

Pension scheme liabilities

1.0

1.1

0.6

1.3

0.7

0.7

0.7

Other long-term liabilities

2.3

0.1

0.0

0.8

0.6

0.6

0.6

Long-term provisions

20.0

52.5

51.8

50.0

47.5

35.5

35.5

Current liabilities

Trade accounts payable

46.7

53.1

69.5

69.7

66.3

57.8

62.8

Other payables

2.6

8.3

3.3

4.1

3.6

3.6

3.6

Accrued liabilities and deferred

13.6

16.5

17.2

20.0

16.3

16.3

16.3

income

Short-term financial liabilities

6.8

7.0

9.8

125.8

5.9

5.8

5.6

Short-term provisions

1.5

7.6

5.6

1.2

3.8

3.8

3.8

Total liabilities

221.2

291.6

301.3

393.3

261.4

234.9

236.0

Total equity and liab.

624.0

672.4

697.6

800.5

702.7

705.6

712.2

Source: Research Dynamics, Company data

CPH 4

Switzerland | Industrial Goods & Services

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

Cash flows from operating activities Investments in tangible fixed assets

Disposals of tangible fixed assets

Investments in intangible assets

Investments in business activities

Repayment of long-term financial receivables

Cash flow generated (used) in investment activities

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

Cash flow generated (used) in financing Exchange (losses)/gains

Net change in cash

Opening cash balance

Closing cash balance

FY15

FY16

FY17

FY18

FY19

FY20E

FY21E

(33.1)

(7.7)

16.2

42.3

48.5

40.1

16.3

35.3

33.9

(1.5)

26.3

31.2

30.8

30.7

8.4

(13.1)

13.6

(8.6)

(10.2)

5.7

(3.5)

8.1

(0.5)

(7.7)

5.0

(1.3)

4.6

(6.7)

(6.8)

1.6

15.8

(1.1)

(2.8)

(8.5)

5.0

11.5

7.7

(4.2)

0.4

(4.3)

(22.0)

-

23.3

21.9

32.2

64.3

61.0

50.8

41.9

(21.9)

(20.7)

(32.3)

(22.3)

(21.9)

(19.8)

(30.3)

1.6

20.5

15.4

6.3

0.8

-

-

(1.6)

(1.2)

(2.4)

(2.2)

(1.0)

(1.1)

(1.1)

-

(18.5)

-

(27.9)

-

-

-

-

-

-

-

100.9

-

-

(22.0)

(19.9)

(19.3)

(46.0)

78.9

(20.9)

(31.4)

(15.3)

0.1

1.0

(4.3)

(123.4)

(0.1)

(0.2)

(1.1)

19.0

(0.6)

(3.0)

(1.1)

(5.9)

(3.8)

(0.1)

(0.4)

0.2

2.1

(0.2)

-

-

(3.9)

(3.6)

(3.9)

(3.9)

(10.9)

(10.8)

(10.8)

(20.4)

15.2

(3.3)

(9.1)

(135.6)

(16.8)

(14.8)

2.3

0.1

0.2

(0.3)

(0.2)

-

-

(16.7)

17.2

9.8

8.9

4.1

13.1

(4.3)

69.9

53.1

70.3

80.1

89.0

93.1

106.2

53.1

70.3

80.1

89.0

93.1

106.2

101.9

Source: Research Dynamics, Company data

Key Ratios

FY15

FY16

FY17

FY18

FY19

FY20E

FY21E

Growth Ratios

Sales Growth

(15%)

4%

8%

14%

(2%)

(17%)

6%

Chemistry division

4%

11%

9%

5%

(2%)

(8%)

3%

Paper division

(21%)

(1%)

7%

14%

(3%)

(32%)

7%

Packaging division

(7%)

9%

9%

17%

0%

5%

6%

Operating Profit Growth

NM

NM

(51%)

NM

10%

(65%)

2%

Net Income Growth

NM

NM

NM

165%

14%

(17%)

(59%)

Profitability Ratios (%)

Operating margin (before

(5%)

1%

1%

10%

11%

5%

4%

impairment) (% )

Chemistry division

(3%)

2%

5%

8%

6%

5%

4%

Paper division

(11%)

(2%)

(5%)

10%

12%

(2%)

(2%)

Packaging division

5%

8%

7%

10%

11%

13%

13%

EBITDA Margin %

3%

8%

7%

16%

17%

12%

11%

Net Margin (%)

(8%)

(2%)

3%

8%

9%

9%

4%

Return Ratios

Profit Margin

(8%)

(2%)

3%

8%

9%

9%

4%

Asset Turnover

0.6x

0.7x

0.7x

0.7x

0.7x

0.6x

0.6x

Financial Leverage

1.6x

1.7x

1.8x

1.9x

1.8x

1.5x

1.5x

Dupont ROE (%)

(8%)

(2%)

4%

11%

11%

9%

3%

ROCE (%)

(4%)

1%

1%

10%

10%

3%

3%

ROA (%)

(5%)

(1%)

2%

6%

6%

6%

2%

Leverage Ratios

Debt - Equity Ratio

0.3x

0.4x

0.4x

0.6x

0.3x

0.2x

0.2x

Net Debt - Equity Ratio

0.2x

0.2x

0.2x

0.4x

0.1x

0.0x

0.0x

Interest Coverage

(5.5x)

1.4x

0.7x

11.8x

9.1x

4.5x

5.1x

Liquidity Ratios

Current Ratio

2.6x

2.4x

2.3x

1.6x

2.8x

3.2x

3.1x

Quick Ratio

1.9x

1.7x

1.7x

1.3x

2.0x

2.4x

2.3x

Valuation Ratios

EV/EBITDA

25.8x

12.1x

13.2x

5.4x

5.1x

8.8x

8.8x

P/E

NM

NM

24.9x

9.4x

8.2x

9.9x

24.4x

Source: Research Dynamics, Bloomberg, Company data

CPH 5

Switzerland | Industrial Goods & Services

DISCLAIMER

CPH Chemie + Papier Holding AG ("CPH") is a client of Research Dynamics. The equity research report(s) are prepared for informational purposes only and are paid for by the company portrayed in the report. Research Dynamics is a division of Dynamics Group AG. Dynamics Group is an independent consultancy firm focused on strategic advisory, communication management and research and analysis.

This report (henceforth known as "document") has been drafted by the authors concerned as a non-binding opinion on the market situation and on the instruments of investment in question and compiled by Dynamics Group in order to provide background information about the companies. It is intended exclusively for the purpose of information.

Dynamics Group has not individually verified the information and data on which this document is based. All information and data in this document originate from generally available sources which the author concerned or Dynamics Group viewed as reliable at the time of drafting this document. However, no liability can be assumed for their correctness, accuracy, completeness and appropriateness - neither expressly nor tacitly. The contents of this document do not represent an assurance or guarantee by the authors concerned or Dynamics Group. Forward-looking information or statements in this document contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations

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CPH Chemie + Papier Holding AG published this content on 28 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 October 2020 08:19:02 UTC