Itaú BBA reiterated its buy recommendations on Brazilian pulp and paper manufacturers Suzano (SUZB3) and Klabin (KLBN11), citing attractive valuations after its estimates update based on the companies’ second-quarter results.
According to local media outlet InfoMoney, the analysis took into account a projected appreciation of the real, as per the bank’s macroeconomic team, along with recent corporate moves.
Today, shoppers unlocked the deal for Dai Estt-2i of Suzano, with Kimberly-Clark making a proposal and Klabin giving up a bad investment in sensitive forestry assets.
BBA’s positive medium-term outlook is based on these developments and an anticipated tightening in the global pulp demand-supply balance by 2026.
Pulp prices are projected to be trading in the region of US$580 by this time.
Nonetheless, it noted that this positive backdrop is tempered by a cautious outlook in the short term, with no catalysts to push shares higher in the next six months.
Suzano: Higher target price and acquisition impact
Itaú BBA boosted Suzano’s target price to R$70 per share by the end of 2026 from R$63, reflecting a potential 33% appreciation.
The advice comes despite the bank’s EBITDA outlook for 2026 being around 12% lower than the market consensus.
Suzano’s earnings estimates, however, have moved. The negative effect of the currency rate is now expected to be mitigated by increased EBITDA from the joint venture with Kimberly-Clark, which is scheduled to close in mid-2026.
Even with that rise, Suzano’s projected R$9.5 billion investment to acquire its part in the Kimberly-Clark joint will limit free cash flow in 2026.
Without this spend, the bank forecasts the company’s cash flow return to be 13%. By 2027, the yield is expected to reach 18%, earning more than US$2 billion.
In terms of valuation, Suzano trades at 5.7 times Enterprise Value to EBITDA in 2026, falling to 4.4 by 2027. These multiples reinforce BBA’s upbeat outlook, despite near-term financial headwinds from acquisitions.
Klabin: Discounted valuation, solid cash generation
Itaú BBA maintained a buy recommendation for Klabin, but decreased the target price from R$25 to R$23 per share by the end of 2026. Even with a lower objective, the bank sees a 25% upside potential.
According to the research, Klabin is currently trading at 6.2 times EV/EBITDA for 2026, significantly lower than its historical average range of 8.0 to 8.5 times. According to BBA, this discount makes the stock desirable.
Klabin is estimated to produce an average free cash flow yield of 7% from 2025 to 2027, excluding the Plateau Project.
This amount of cash generation should result in an average dividend yield of 5.5% over the same time period, strengthening the company’s appeal to income-seeking investors.
Sector outlook: Optimism for 2026, challenges before
Itaú BBA’s sector outlook remains cautiously upbeat. The bank expects the global pulp market’s supply-demand balance to improve dramatically by 2026, with prices forecast at US$580 per ton.
This forecast supports its favourable medium-term outlook for both Suzano and Klabin.
At the same time, the institution highlighted the lack of short-term catalysts that could propel shares higher in the near future.
Currency volatility, continued capital commitments, and macroeconomic concerns continue to weigh on sentiment.
Long-term value plays
Itaú BBA reiterated its buy calls, citing Suzano and Klabin as attractive entry locations for long-term investors willing to look past short-term challenges.
Suzano’s merger with Kimberly-Clark and Klabin’s rigorous capital allocation through asset sales create strategic levers that might unlock value by 2026 and beyond.
While execution concerns exist, the bank’s revised expectations indicate that both firms are well-positioned to profit from a future rebound in pulp prices and stronger industry fundamentals.
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