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Investing.com - Morgan Stanley has upgraded UPM-Kymmene OYJ (HE:UPM) (OTC:UPMKY) from Equalweight to Overweight and raised its price target to EUR30.00 from EUR26.00.
The upgrade comes as the Finnish forest industry company enters what Morgan Stanley describes as "harvest mode," with decade-low capital expenditure requirements reducing cash needs to approximately EUR600 million per year.
Morgan Stanley projects UPM’s 2026 EBITDA will reach EUR1.8 billion, boosting free cash flow conversion to over 65% and free cash flow yield to 10%.
The investment bank also highlighted UPM’s potential for capital-light growth through pulp footprint optimization in Uruguay, which could increase volumes by 18% by 2030, biofuels operations expected to turn EBIT positive from Q4 2025, and biochemicals becoming EBIT positive from 2027.
UPM’s gearing is forecast to decrease to approximately 1.6x by year-end 2026 from 2.4x in Q3 2025, positioning the company to deliver top-quartile returns of 8-10% through dividends and share buybacks in the coming year, according to the research note.
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