Significant CIBC Upgrade CIBC analyst Hamir Patel downgraded Acadian Timber Corp. (ADN-T) to “underperformer” from “neutral,” citing underwhelming softwood sawlog pricing appreciation in New Brunswick despite robust lumber markets. He has a price target of $17 on the stock.
“Log prices in New Brunswick have been sluggish due to the provincial government’s perplexing decision to leave royalty rates on crown timber unchanged for the past six years. While Acadian has attractive ESG attributes and is well positioned to pursue growth opportunities, we do not expect much activity from the company until a new CEO is in place (which may not happen until closer to the expiry of the transitional management team’s role in September 2021),” he commented.
But Mr. Patel raised price targets on several other forest products stocks as he bumped up his assumptions for lumber and oriented strand board pricing through 2022. He cautioned, however, that he expects prices to moderate next year as record profitability incentivizes more capacity to come onstream.
He raised price targets on Canfor (from C$35 to C$41), Canfor Pulp (from C$10 to C$11), CanWel (from C$9.50 to C$10.50), Conifex (from C$2.50 to C$3.00), Domtar (from $37 to $41), Hardwoods (from C$38 to C$39), Interfor (from C$37 to C$50), Mercer (from $17 to $19), Resolute (from $11 to $14), Stella-Jones (from C$57 to C$60), West Fraser (from C$120 to C$135) and Western FP (from C$1.90 to C$2.50). He lowered his price target on Cascades (from C$19 to C$18) given reduced earnings estimates.
He further commented: “Our top pick is West Fraser. Our other Outperformer wood products names include Interfor, Canfor, Resolute and Western FP. We also remain constructive on Stella-Jones and Hardwoods, two names with attractive M&A pipelines and exposure to residential construction. We also believe SJ is an underappreciated beneficiary from significant pole demand over the next decade associated with the electrification of mobility. On the paper and packaging side, we continue to favour Mercer given its pulp pricing leverage and growing lumber business.”