New holding Essity

As of yesterday’s close I entered a 6% position in Essity, the newly formed personal care and tissue products company. Essity was the Hygien part of SCA and was spun out of SCA earlier this year. That left SCA with forest ownership and pulp production in SCA.

I have kept SCA on the radar for a long time and it has always been the Hygien part of the company that I found attractive. After the spin-off the Essity share has traded down whereas the SCA part has continued up. I like Essity for the quality of their products and I believe there is room for Essity to increase margins to similar levels like competitors. I think they have especially strong products for growth in Asia, for example through their majority holding of Hong Kong listed Vinda. I have considered investing in Vinda instead, but I see more room for multiple expansion in Essity and also a more diversified holding (less concentrated on China).

4 thoughts on “New holding Essity

    1. So far no deep DD done that I can present here. Peer valuation, simple metrics like P/E, looking at margin, sell side research etc. I will try to present a full DCF later. This goes more into the Quality bucket, like for example ISS, rather than selling at a steep discount.

      1. This seems a Fundsmith-type company: quality with resilience in difficult times.
        ROCE (the preferred metric by Fundsmith) is ~15%, which is good but not great, and the Oper.Margin is 11-12% is rather mediocre :-s !
        Unless they improve their numbers quite soon, I think there are better bets

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