DS Smith PLC (LSE: SMDS)

DS Smith PLC is an FTSE 100 index listed provider of sustainable packaging solutions, paper products and recycling services worldwide.

Investment Rationale – SELL at GBX 350.50

• Profit Booking: SMDS’ stock price has comfortably crossed the R1 level suggested in the previous report published on 23 December 2022. Therefore, it is presenting a profit booking opportunity.
• Overvalued Multiples: On a forward 12-month basis – key trading multiples (EV/EBITDA, Price/Earnings, and Price/Cash Flow) are higher than the median of the Containers & Packaging industry.
• Technical Standpoint: The stock price has breached the upper Bollinger Band. Thus, stock prices can face retracement in the short-term.
• Macroeconomic Uncertainties: The market sentiments can remain weak in the short-term due to resurgence in Covid-19 cases in China, 40-year high inflation, expected economic recession, subdued consumer disposable income, geopolitical tensions, and political risks.

Share Price Chart  

(Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23E) (Illustrative)

Conclusion

Based on the notional gains, macroeconomic challenges, coupled with the unfavorable valuation conducted above, a "SELL" recommendation on DS Smith PLC has been given at the closing market price of GBX 350.50 (as of 9 January 2023).

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 9 January 2023. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.