Materials

Report by European Research

BASF’s reported €22.15 approach for EVK has been rejected as too low, but European Research believes €24-27 is achievable without stretching the valuation, with €25 their base case. At that level, BASF would pay 7.17x FY26E EBITDA, falling to 6.06x after €400m of estimated synergies, while RAG-Stiftung’s 43.8% stake would be worth €5.10bn. A partial RAG rollover into BASF could help bridge the gap while limiting the balance-sheet impact. They assign a 70% probability to a transaction, giving a probability-weighted value of €22.97, rounded to a €23 target price. That implies 15.8% upside from €19.84 vs. 8.9% downside to the €18.07 unaffected price.

Report by New Normal Consulting

Paul Hodges has long viewed chemicals as the best leading indicator for the global economy. Right now, it’s flashing red warning signals. INEOS, a widely-respected company in the industry, confirmed the widespread nature of the chemicals downturn, with lower margins, higher inventory holding costs and lower volumes across their businesses. They’re not alone, with BASF seeing a significant profit fall of more than 75%. It is a situation clearly reminiscent of 2008, when warnings about the risk from the US subprime market were ignored until it was too late. Hopes of avoiding recession are misplaced.

Against the background of a growing world population, our food system is considered unfit for purpose as it entails unsustainable or socially unacceptable environmental, animal and health costs. Agriculture and the food industry are responsible for about a quarter of global greenhouse gas emissions, largely because of animal farming. What is more, diets are biased towards animal fats, which have potentially detrimental health effects. Piers Nestler looks at the possible implications for the industry as he tries to identify beneficiaries from a transition to alternative proteins. Companies discussed BASF, Bayer, Biotalys, Danone, GEA, Kerry Group, KWS Saat and Vilmorin.

The inevitable growth of agtech, with its $300bn market growing at 7% CAGR, should not be overlooked. Companies in the industry offer attractive returns in excess of the cost of capital, consistently outperforming across the cycle. Dan Waterman delves deep into the market and identifies companies positively exposed to agtech themes, including ACGO, Deere, Genus, Zoetis, Darling Ingredients and Novozymes. Expect agchem manufacturers to feel the pressure in the face of increasing regulation, including BASF, Bayer and Nufarm.