Materials

Report by Alembic Global Advisors

As management guides to a 1Q23 EBITDA figure significantly ahead of consensus, Hassan Ahmed expects to see positive earnings revisions and share price outperformance throughout the year. Nearly 75% of company revenues come from APAC and EMLA, where both regions experienced higher costs and weaker demand in 2022. With China reopening, and with natural gas prices currently significantly lower in both Europe and the US, Hassan expects last year's earnings headwinds to become tailwinds. He increases his 12-month TP from €35 to €47.

Materials

Report by Alembic Global Advisors

Chemical equities' performance is worse than anything we have seen in recessionary periods over the last 60 years, suggesting limited downside and significant upside for some. Sector balance sheets and cash flows are far better positioned today than in 2008/09. For 2023, Hassan Ahmed prefers companies that may benefit from catalysts (Tronox and Braskem), secular changes within their markets (Olin), or have high China / Europe exposure (Covestro and Tronox). He sees PureCycle as a high-risk / high-return play - TP $30 (300%+ upside).

Materials

Report by Alembic Global Advisors

Current consensus expectations for the sector in Q3 still seem tepid, keeping in mind product margin gains and pricing strength. It is highly possible that companies under coverage will experience positive earnings revisions throughout 2021. Covestro AG, TP $73 (~25% upside); Chemours Company, TP $46 (~50% upside); Celanese Corp., TP $200 (~25% upside); Dow Inc, TP $85 (~45% upside)