DS Smith PLC (LON: SMDS), valuation on May 10, 2022

Summary

• Stock: DS Smith PLC (LON: SMDS) common equity

• Market cap: £4.3bn

• Rating: Add

• Price: £3.11

• Target: £4.55

source: S&P Capital IQ

Setting the stage

DS Smith PLC (LON: SMDS, £4.3bn market cap) is a British cardboard packaging business. It earns money by manufacturing cardboard packaging and speciality paper for large fast-moving consumer goods (FMCG) companies. It also offers recycling services. While its home market is its biggest, providing 16% of sales, DS Smith operates across Europe and North America.

Global graphics paper production fell by a third over the last decade as digital media replaced print. However, demand for cardboard packaging increased by a quarter in that same time, offsetting some of the lost orders. Consumers and companies are printing less but are buying more things online and getting them delivered. Americans, in particular, are opening their virtual wallets; they spent $871bn on e-commerce in 2021, a fivefold increase from a decade ago. As a result, the paper mar…