Box makers are well placed to pass on increases in raw materials to customers, according to broker Jefferies.
The broker remains positive on the containerboard and box markets this year and next and expects to see cumulative containerboard (paper) & box price increases more than offsetting cost inflation.
Containerboard (paper for box) prices rose 5% in July, the broker reported, and with balanced supply and demand dynamics in 2022-23, it believes industry prices will stay higher for longer.
The inexorable rise in popularity of ordering stuff online should underpin demand and benefit the likes of DS Smith PLC (LSE:SMDS), Mondi PLC (LSE:MNDI) and Smurfit Kappa Group plc (LSE:SKG).
That listing order – Smith, Mondi, Smurfit – represents Jefferies’s order of preference for the stocks.
Jefferies is aware that market sentiment towards the sector is coloured by concerns that we are approaching “peak pricing” and that a de-rating is due but it rates all three stocks as a “buy”.