GS starts Essity with 'neutral' citing margin volatility as key risk

** Goldman Sachs initiates coverage of Swedish hygiene products maker Essity ESSITY_A with a "neutral" rating and PT of SEK 275, seeing margin volatility as a key risk

** The broker expects that the company can expand its EBITA margin by about 50 basis points to 14.5% by 2027, narrowing its gap to peers

** However, it sees margin volatility a key risk, as pulp and energy are 20% of cost of goods sold (COGS) and have historically driven over 90% of margin swings

** "Recent pulp deflation and EUR strength should help gross margin short term, though if it persists, it might lead to more intense promotion environment, which could pressure margins," as per the brokerage

** Out of 14 analysts that cover the Essity stock, eight rate it "strong buy" or "buy", four rate it "hold", and two rate "sell" - LSEG data