Mondi Plc

Research Note

Mondi PLC is a leading producer and distributor of packaging and paper products, operating in three primary segments: corrugated packaging, engineered materials, and flexible packaging.

The company's products serve a wide range of industries, including consumer products, retail, automotive, construction, chemicals, food and beverage, personal care, and printing. The majority of its revenue is generated from Europe. 

Despite facing challenges in 2022, such as inflationary cost pressures and the Russia-Ukraine conflict, which affected Mondi due to its packaging operations in Russia, the company has since divested from these operations which the market essentially assigned a nil value to.

However, this divestment should position Mondi well for recovery in 2023 if the European economy does not enter into a recession. Mondi is a quality business with high margins and a strong balance sheet. 

The stock is currently trading at an attractive valuation multiple, with a price-to-earnings ratio of 6.8 compared to the five-year average of 13.3. The price to free cash flow is also modest at 6.4. Additionally, the company offers investors some cash yield in the form of dividends, and the current dividend yield is 3.69%.

In summary, Mondi PLC is a strong, high-margin business with a solid balance sheet that is worth considering as a potential investment. The company's diversified product portfolio, coupled with its divestment from Russian operations, positions it well for recovery in 2023. Moreover, the company's attractive valuation, modest P/FCF ratio, and divide