UPM delivered 14% 3Q20 cons EBIT beat. Despite reduced volumes, 3Q20 saw welcome return to profit in graphic paper. As confidence builds in: 1) Global pulp recovery 2) Stabilising Communication Paper outlook, 3) UPM ''Spearheads for Growth'' delivery, while maintaining appealing dividend stream: We expect positive re-rating. We reaffirm Outperform with EUR31TP. 14% 3Q20 consensus EBIT beat Due to 21% fall in UPM graphic paper volumes and lower pulp prices: UPM 3Q20 Comparable EBIT declined 37% Y/Y to EUR215m (3Q19: EUR342m), but this was a 14% beat vs EUR188m Infront Data cons, principally due to a welcome return to profits in UPM Communication Paper which reported EUR19m 3Q20 Comparable EBIT. UPM closing 1.2mT graphic paper (17% capacity), reducing costs by EUR130m UPM has announced closure/sale of three paper mills (Kaipola, Shotton and Chapelle), 17% of its 7.3mT graphic paper capacity, targeting EUR130m annualised cost savings. Global pulp recovery boosts FY21e UPM Biorefining profitability Over past three months Chinese pulp prices have risen 5%, with falling pulp inventories at Chinese ports and Chinese pulp futures rising 8% from July 2020 lows supporting our view that Chinese (and global) pulp prices are at/near trough levels, boosting FY21e UPM Biorefining profit recovery. 4% FY20e EPS upgrade: Reaffirm Outperform with (SOTP-based) EUR31 TP 14% 3Q20e EBIT beat gives 4% FY20e EPS upgrade. As confidence builds in: 1) Global pulp recovery 2) Stabilising Communication Paper outlook, 3) UPM ''Spearheads for Growth'' delivery, while maintaining appealing dividend stream: Expect UPM re-rating. Outperform with EUR31TP.