JPMorgan sees buying opportunity at DS Smith after recent falls

16th Apr 2014 12:22

Comments from JPMorgan Cazenove gave consumer packaging group DS Smith a boost on Wednesday, saying that the recent de-rating of the stock has created an opportunity for investors ahead of a trading update later this month.JPMorgan reiterated its 'overweight' recommendation and 355p target price for the stock.Since the start of February, DS Smith's share price has fallen by 6.7%, underperforming its peers, and it now trades at similar valuation multiples to others in the sector. "Yet, in our opinion, deserves a premium on account of its lower cyclicality and lower capital intensity," the bank said.JPMorgan said there has been no deterioration in the company's prospects or market position to justify the stock's recent underperformance."The European market for corrugated packaging is becoming more consolidated and more disciplined in its allocation of capital. Following its acquisition of SCA Packaging and Otor, we believe DS Smith has positioned itself as the vanguard of this trend. "The company is winning share in a European packaging market that is exhibiting signs of recovery. This momentum, coupled with ongoing synergy realisation and the potential for more acquisitive activity in the future, underpins our view that the stock remains positioned for some further positive re-rating and upgrades to market estimates."DS Smith is expected to deliver 31% earnings per share growth in the current financial year, ending April 2014. The bank expects the company to confirm it is trading ahead of its organic growth targets when it releases its pre-close statement on April 30th.The stock was trading 4.3% higher at 315.2p by 12:53.BC