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small-cap

Compelling Bet on This Small-Cap Materials Stock – SWM

Feb 16, 2022 | Team Kalkine
Compelling Bet on This Small-Cap Materials Stock – SWM

Schweitzer-Mauduit International, Inc.

SWM Details

Schweitzer-Mauduit International, Inc. (NYSE: SWM) is a diversified paper and resin-based product manufacturer. It makes and sells paper and reconstituted tobacco goods and specialist paper products to the tobacco business. Advanced Materials and Structures (AMS) and Engineered Papers (EP) are the two segments in which the company operates.

Latest News:

  • Launched New Botanical Solution: SWM announced the launch of Botani on February 10, 2022, a premium hemp and botanical solutions company that would provide the natural fibers sector with novel hemp wraps, fillers, and rolling/pre-roll papers.
  • Improved Brand Identity: With the presentation of its revamped shared purpose, the company marked a new chapter in its history. SWM announced its revised logo and updated the website on February 2, 2022. (www.swmintl.com). The new visual identity draws on SWM's history and highlights the firm's capabilities as a forward-thinking multinational company.

Q3FY21 Results for the period ended September 30, 2021

  • Strong Consumer Demand: The continued robust demand in AMS, highlighted by 10% organic sales growth, is being countered by rising input costs.
  • Rise in Sales: Total sales in Q3FY21 was USD 383.6 million, up 37.34% from USD 279.3 million in Q3FY20, due to an 87% jump in advanced materials and structures sales, including the benefit from the Scapa acquisition.

(Source: Company's Website) 

  • Decline in operating Profit: Despite the rise in sales, the company's operating profit had down by 37.84% to USD 23.0 million in Q3FY21, due to high operating costs and cost of sales.

Key Risks:

  • Consumer Demand & Product Risk: The company is exposed to changes in Recon product sales or production volumes, pricing and manufacturing costs, cigarette paper, and tobacco-related blends for their cigarettes, target inventory levels, new technologies such as e-cigarettes. Furthermore, there is rivalry and changes in AMS end-market goods because of shifting client expectations. 

Valuation Methodology: EV/Sales Multiple based Relative Valuation