Mondi Share Price Recovery Falters as Morgan Stanley Downgrades – Will Support Hold?
After a short-lived stabilisation from decade lows, Mondi’s share price has come under renewed pressure as a major broker downgrade..
Quick overview
- Mondi's share price has faced renewed pressure following a downgrade by Morgan Stanley, which cited weak earnings visibility and industry headwinds.
- The brokerage expects Mondi's EBITDA to decline in 2026, reflecting ongoing challenges in key markets and a lack of pricing power.
- Despite investing in innovation and sustainability, Mondi's near-term outlook remains bleak due to persistent demand softness and margin pressures.
- A recent credit downgrade from S&P Global Ratings further highlights the company's financial challenges amid a prolonged industry downturn.
After a short-lived stabilisation from decade lows, Mondi’s share price has come under renewed pressure as a major broker downgrade refocuses attention on weak earnings visibility and persistent industry headwinds.
Downgrade Reignites Selling Pressure
Mondi’s fragile recovery lost momentum this week after Morgan Stanley downgraded the stock to “underweight” from “equal weight,” citing stretched valuation metrics and deteriorating earnings visibility. The downgrade sent shares more than 3.5% lower on Monday, underscoring how sensitive investor sentiment remains after a prolonged period of underperformance.
The brokerage warned that Mondi’s profitability has weakened significantly, with group margins now falling below levels last seen during the global financial crisis. As a result, Morgan Stanley revised its earnings forecasts downward and flagged limited prospects for a meaningful rebound over the next 12 to 18 months.
Earnings Expectations Reset Lower
Morgan Stanley now expects Mondi’s EBITDA to decline again in 2026 compared with 2025, reflecting ongoing pressure across key end markets. Based on its estimates, the quarterly EBITDA run rate exiting 2025 annualises at roughly €800 million—well below the €1.13 billion consensus forecast.
For 2026, the brokerage estimates EBITDA of approximately €958 million. On this basis, Mondi is trading on a forward enterprise value-to-EBITDA multiple of around 8.3 times. Morgan Stanley noted that this represents a roughly 20% premium to the company’s long-term average multiple of 7.2 times, a key factor underpinning its more cautious stance.
In an environment where earnings momentum remains weak, the analysts argued that such a valuation premium is difficult to justify.
Demand Conditions Remain Challenging
The downgrade also highlighted persistent softness across Mondi’s end markets. Operating rates remain suboptimal across all major product categories, while demand has been subdued since 2022 amid weak consumer confidence and slowing economic growth, particularly in Europe.
Morgan Stanley does not expect a material improvement in supply-demand dynamics over its investment horizon. Ongoing oversupply, combined with limited pricing power, continues to constrain margins and reduce visibility on earnings recovery.
From Decade Lows to a Fragile Bounce
Mondi’s share price came under severe pressure in early October following a disappointing third-quarter trading update that revealed weakening demand and worsening market conditions. The stock fell to around R182, its lowest level in nearly a decade, marking the culmination of a difficult year for the paper and packaging group.
MNPJ Chart Daily – Falling Below the 50 SMA Again
At that point, shares were down roughly 28% year to date, with long-term moving averages consistently capping upside attempts and reinforcing a broader downtrend. Over the past two months, however, the selling pressure eased somewhat. Shares retraced higher and briefly moved above short-term moving averages on the daily chart, suggesting tentative stabilisation.
MNPJ Chart Weekly – The 20 SMA Rejected the Price
But that recovery has since stalled, with prices once again rolling over after failing to break through stronger resistance levels such as the 20 weekly SMA (gray), indicating that bearish control has not yet been decisively challenged.
Innovation and Sustainability Provide Strategic Support
Despite the weak operating backdrop, Mondi has continued to invest in innovation and sustainability—an area that underpins the longer-term bull case. Recently, the company announced a collaboration with Polish bicycle manufacturer Polana Bikes to develop a reusable, paper-based packaging solution for premium bicycles.
The new system is designed to reduce plastic usage, simplify assembly, and improve the customer unboxing experience. Central to the solution is Mondi’s ProtectorBAG, a recyclable paper-based product engineered to protect bicycle components during transport.
While initiatives like this are unlikely to offset near-term earnings pressure, they reinforce Mondi’s positioning in value-added and sustainable packaging solutions, an area where demand trends are structurally more favourable.
Credit Downgrade Adds to the Pressure
Concerns over Mondi’s financial profile were further underlined by a recent downgrade from S&P Global Ratings, which lowered the company’s credit rating to ‘BBB’ from ‘BBB+’ while assigning a stable outlook. The agency cited weaker credit metrics driven by a prolonged industry downturn.
S&P revised its EBITDA forecasts for both 2025 and 2026 lower, pointing to persistent oversupply in recycled containerboard and uncoated fine paper markets. Subdued demand and lower selling prices have limited producers’ ability to absorb fixed costs efficiently, placing continued strain on margins.
Operational Adjustments Reflect Tough Reality
Management has acknowledged the difficult trading environment, warning that demand has softened across most pulp and paper grades. In response, Mondi has extended planned maintenance shutdowns at several facilities, reducing output to better align production with market conditions.
Chief executive Andrew King has noted that while packaging demand has shown relative resilience, the fine paper segment remains structurally challenged. Competition in this shrinking market has intensified, with aggressive pricing further eroding profitability.
Conclusion: Structural Challenges Still Dominate the Outlook
Mondi’s recent share price stabilisation offered a brief respite after a punishing decline, but the latest broker downgrade underscores that fundamental challenges remain firmly in place. Weak demand, margin pressure, and limited earnings visibility continue to weigh on sentiment, while valuation metrics leave little margin for disappointment.
Although innovation and sustainability initiatives support the company’s long-term strategic positioning, near-term risks remain skewed to the downside. Until clearer signs of demand recovery or pricing power emerge, Mondi is likely to remain under pressure, with any rallies vulnerable to renewed selling.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save