Suzano's Price Declines Despite Imminent Contribution From New Cerrado Mill

Jul. 26, 2024 10:24 AM ETSuzano S.A. (SUZ) Stock3 Comments
(19min)

Summary

  • Suzano's price has fallen possibly from the International Paper bid not going through, but in the meantime, their massive Cerrado pulp facility has become operational.
  • The new facility adds 25% to their already massive production and does so at lower unit production costs.
  • EBITDA growth will be considerable, and cash generation will improve in a return to deleveraging form for Suzano, which quarterly produces around 33% of net debt in OpCF.
  • They also reinstated the dividend last year as a sort of pilot, with substantial scope for dividend growth and payout as deleveraging resumes with Cerrado CAPEX now done.
  • Significant growth potential, bolstered by a tangible deleveraging return and dividend, comes at a very low TTM P/E of around 9x. Markets don't seem to be factoring in the return coming on all that Cerrado CAPEX.
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Paper making process

South_agency

Suzano S.A. (NYSE:SUZ) has been seeing pressures on EBITDA in line with expectations from following the pulp price data. We see a new inflection upward that gives us some immediate confidence in the coming results. But much more importantly (as focused

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The Valkyrie Trading Society is a team of analysts sharing high conviction and obscure developed market ideas that are downside limited and likely to generate non-correlated and outsized returns in the context of the current economic environment and forces. They are long-only investors.

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in SUZ over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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