Sustainability Regulations And Cost Efficiencies Will Support Long Term Packaging Demand

Catalysts

About Duni

Duni provides table setting products and sustainable food packaging solutions for the HoReCa sector and related food service channels.

What are the underlying business or industry changes driving this perspective?

• Rising demand for delivery, digital ordering and takeaway formats, where Duni focuses its Food Packaging Solutions and Duniform concept, can support higher packaging volumes and a broader customer base. This is aimed at revenue growth.
• Customer focus on socializing and atmosphere when eating out aligns with Duni's core offer of premium napkins, table covers and lighting. A successful shift back toward a branded premium mix would be supportive for gross margin and operating margin.
• Regulatory push toward more sustainable materials, including PFAS free and fiber based packaging, aligns with Duni's existing product development and early moves in this area. This can support pricing power and gross margin if customers adopt compliant products at higher value points.
• Ongoing cost reduction initiatives, including efficiency work in production and the new long term logistics partnership with expected annual savings of SEK 35 million to SEK 45 million, are aimed at lowering indirect costs and improving operating margin and cash flow once fully implemented.
• Recent and ongoing acquisitions such as LinePack, ByGreen and Solserv broaden the food packaging offer, particularly around Duniform in the Nordics and outside Europe. This can support cross selling, higher utilization of existing assets and, over time, revenue growth and earnings.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Duni's revenue will grow by 2.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.7% today to 4.5% in 3 years time.
• Analysts expect earnings to reach SEK 365.0 million (and earnings per share of SEK 7.43) by about June 2029, up from SEK 283.0 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 17.6x on those 2029 earnings, up from 13.6x today. This future PE is lower than the current PE for the GB Consumer Durables industry at 20.8x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.19%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• A prolonged downturn in the European HoReCa sector, with visits to restaurants and broader food service remaining well below pre COVID levels and recent declines in 2025, could keep demand subdued in Duni’s core Dining Solutions segment. This would pressure revenue and operating earnings.
• Customers continuing to trade down from branded premium napkins and table covers toward private label and commodity products, as described in Q1 with a negative mix and lower share of premium sales, could structurally cap gross margin and limit any improvement in operating margin and net earnings.
• Persistent cost pressure in energy, logistics, oil and gas related inputs and labor, combined with potential further supply chain disruptions from geopolitical tensions in the Middle East and Asia, may be difficult to fully offset through price increases or efficiencies. This would weigh on net margins and cash flow.
• Higher indirect costs tied to IT investments, ERP replacement, digital solutions, M&A and the new long term logistics partnership, including about SEK 7 million per quarter in additional lease related financial expense and a SEK 600 million lease liability, could keep operating margin and earnings below the company’s 10% margin target for longer than expected.
• If customer willingness to pay extra for more sustainable and fiber based products stays limited while regulations such as PFAS restrictions and packaging rules tighten, Duni may face higher compliance and product costs without matching pricing power. This would constrain gross margin, operating margin and long term earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of SEK108.0 for Duni based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be SEK8.1 billion, earnings will come to SEK365.0 million, and it would be trading on a PE ratio of 17.6x, assuming you use a discount rate of 8.2%.
• Given the current share price of SEK81.7, the analyst price target of SEK108.0 is 24.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.