Overview
J.P. Morgan revised its stance on Essity AB on Monday, downgrading the Swedish hygiene group to "underweight" from "neutral" and lowering its December 2027 price target to Skr215 from Skr245. The firm attributed the move to accelerating inflation in energy and pulp costs that it expects will depress earnings across the coming year.
Earnings and forecast adjustments
The broker trimmed adjusted earnings-per-share estimates, lowering its 2026 forecast by 4.2% to Skr17.46 and cutting the 2027 estimate by 5.0% to Skr18.33. J.P. Morgan is projecting cost of goods sold inflation of 4% for the full year, a headwind it expects to materially affect profitability.
"We acknowledge that the company is c58% hedged on energy for the full year (and 80% on Q1), yet see cost rises beginning from Q2 and likely peaking in H2," the analysts said.
Margin and EBITA outlook
On a margin basis, J.P. Morgan now forecasts a deterioration in adjusted EBITA margin of 100 basis points to 13.1% in fiscal 2026, below the consensus estimate of 13.8%. The brokerage's full-year adjusted EBITA projection is Skr18,404 million, roughly 5% lower than the Bloomberg consensus figure of Skr19,282 million.
Revenue and organic growth assumptions
Despite the margin pressure, J.P. Morgan models a stronger top-line performance than peers for FY26, forecasting organic sales growth of 2.2% versus a consensus of 1.4%. The brokerage attributes the increase to a projected 1.5% contribution from pricing and 0.6% from volume gains.
For the first quarter of 2026, the analysts expect flat organic growth overall: a 0.7% rise in volumes balanced by a 0.7% decline in pricing. They project adjusted EPS of 4.02 Swedish crowns for Q1, below the consensus estimate of 4.42 crowns, a shortfall of about 9%.
Division-level near-term expectations
J.P. Morgan's Q1 revenue view is differentiated by division. Personal Care is forecast to lead with 2.5% like-for-like growth, Health & Medical is seen up 1.1%, and Professional Hygiene is expected to rise 0.5%. Consumer Tissue is projected to decline 2.7%, predominantly driven by a 2.2% fall in price and mix.
Valuation methodology and resulting target
The analysts shifted from a sum-of-the-parts approach to a discounted cash flow (DCF) framework. They applied a weighted average cost of capital of 10% and a long-term growth rate of 1.5%. The DCF produced a firm value of Skr175.13 billion. After accounting for Skr22.38 billion in net debt and Skr415 million in minority interests, the valuation yields an equity value of Skr152.64 billion, or Skr215 per share.
Market multiples and stock performance
At the time of the note, Essity was trading at Skr247, equivalent to 14.1 times J.P. Morgan's 2026 adjusted EPS estimate and 8.1 times EV/EBITDA. The stock's 52-week trading range stood between Skr236.10 and Skr293.10. Over the past 12 months, the shares have fallen 14.1% on an absolute basis and underperformed the MSCI Europe index by 35.3%.
Upside considerations
J.P. Morgan highlighted upside scenarios that could offset the downside pressure: stronger-than-expected demand and better pricing realization ahead of cost-of-goods inflation, as well as a weakening U.S. dollar, could all improve outcomes versus the brokerage's view.
This report focuses on the company's forward-looking financial drivers, including hedging levels, input-cost inflation, divisional revenue mix, and valuation assumptions. It reflects J.P. Morgan's revised estimates and target price without introducing additional data beyond the bank's published analysis.