Section1: Company Overview and Fundamental Insights:

1.1 Company Overview:

Canfor Corp (TSX: CFP) is a softwood lumber company that also owns around half of Canfor Pulp. It is active throughout North America, with lumber mills in British Columbia, Alberta, and the Southeastern United States. It has two reportable segments: Lumber and Pulp and Paper.

1.2 The Key Positives, Negatives, Investment Highlights and Risks

1.3 Top 10 Shareholders:

The top 10 shareholders together form ~63.06% of the total shareholding. Pattison (James Allan) and Pictet Asset Management Ltd.  hold a maximum stake in the company at ~­­­52.02% and ~2.48%, respectively.

1.4 Key Metrics:

The company reported inline sales in Q3 2022 against Q3 2021, however its lumber segment earnings on YTD basis in Q3 FY 2022 stood at CAD 1744 mn, while the cumulative EBITDA for the same segment from FY 2019 to YTD FY 2022 was clocked highest by the US South region followed by British Columbia and Europe. On the other hand, the US housing starts forecasts for coming years is on the lower side. But the company is clocking steady growth and is also gaining traction under its liquidity which is improving on the sequential basis, demonstrating its strength and adaptability.

Section 2: Business Updates and Financial Highlights

2.1 Recent Updates: The below picture gives an overview of its recent activities, such as announcement regarding temporarily curtailing Canadian production capacity and adjusting its operating rates.

2.2 Insights on Q3 2022 Financial Performance:

Section 3: Key Risks:

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

4.2 Fundamental Valuation

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is Dec 14, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

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