May 12, 2025 (RBC Capital Markets LLC) –
Rayonier Advanced Materials Inc. (NYSE:RYAM; USD 3.94)
Looking for conditions to normalize
Price Target Revision | Comment
May 8, 2025
RBC Dominion Securities Inc.
Matthew McKellar (Analyst) (403) 476-9042
Amit Prasad (Associate)
Rating: Outperform
Price Target: USD 6.00 (prev: 9.00)
Our view: While 2025 is setting up to be a more challenging year for RYAM than we had anticipated, and we continue to see the path forward as somewhat uncertain as it relates to demand levels and trade issues, we think the reset in valuation has been significant and see an opportunity in the shares from current levels. We reiterate our Outperform rating with a $6 price target.
Key points:
Lowering price target to $6 (previously $9); reiterating Outperform. Our price target is based on a blended ~4.5x EBITDA multiple on our trend EBITDA estimate (85%) of $300MM and our 2025 EBITDA estimate (15%) of $178MM.
China has seemingly excluded dissolving pulp from retaliatory tariffs. While no official announcement has been made, China seems to be exempting dissolving pulp (including viscose and cellulose specialties) from the 125% countertariffs it has applied to imports from the U.S. While it seems possible that this could still change, we think it may also reflect that it is difficult to substitute for cellulose specialties products. Fluff has not received a similar exemption, and as such, RYAM is working to find alternative markets while also planning to decrease its mix of fluff pulp production in favour of paper grades. We think the outlook for paper grade pulp products also seems to be softening somewhat, and wonder to what extent the industry may swing from fluff to SBSK production and introduce incremental volumes into a soft market.
CS guidance was above our estimate going into the quarter. RYAM expects $237-245MM of EBITDA in 2025, which is lower than its initial guidance of $255-265MM but ahead of our estimate heading into the quarter of $230.4MM. Orders from China initially dried up following Liberation Day, but conditions seem to be stabilizing as the quarter progresses, and management noted that its guidance essentially assumes normalized order patterns from July onward. The pause in orders following Liberation Day could help accelerate the destocking in acetate that management has noted, helping set the segment up for a better H2/25.
A soft outlook for Paperboard and High-Yield Pulp. RYAM increased its 2025 guidance for Paperboard to $25MM, up from $15MM previously, with its updated guidance reflecting imports from Canada not being subject to tariffs (RYAM's products are USMCA-compliant), but also a weaker USD (a $10MM swing by itself) and weaker pricing (both on mix after losing some share in the higher-end lottery business, and as new supply is introduced with the Sappi start-up). We think there is a chance that SBS pricing holds at current levels if demand can continue to improve and baseline tariffs end up backing out FBB imports, but acknowledge a somewhat precarious setup.
RBC Dominion Securities Inc.
Matthew McKellar (Analyst) (403) 476-9042; matthew.mckellar@rbccm.com
Amit Prasad (Associate) (403) 476-7417; amit.prasad@rbccm.com
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