FY15 results were slightly ahead of expectations. Citi notes the outlook commentary was steady, while a commitment to cost savings should limit earnings declines.
Citi continues to believe limited revenue growth and material cost inflation will hinder profit growth over the next three years.
Potential downside risks to earnings from cyclical and structural factors mean it is hard to argue the valuation is unwarranted and the broker retains a Neutral rating. Target is reduced to 85c from $1.33.
Target price is $0.85.Current Price is $0.81. Difference: $0.04 – (brackets indicate current price is over target). If SWM meets the Citi target it will return approximately 5% (excluding dividends, fees and charges – negative figures indicate an expected loss).