Global Chemicals Weekly:News,views and valuation
Lanxess (LXSG.DE, BUY).
Q4’s were strong with u/l EBITDA up 21% YoY and 3% above DBe/consensus.
The growth came from strong performance in HPM and PC offsettingweakness in Arlanxeo and AI. The FY 17 outlook was expectedly conservativewith EBITDA pre-exceptionals (ex Chemtura) expected to be slightly ahead of2016 (we note typical conservatism of mgmt at the start of the year withhistorically, guidance upgrades as the year progresses). This is despite thestrong Q1 guided with EBITDA up c.20%. At 6.9x 2018E EV/EBITDA (first fullyear of Chemtura) with strong EPS growth, and a higher-margin, less cyclical,more specialty portfolio we see value. BUY.
Symrise (SY1G.DE, BUY).
Symrise delivered another good quarter with sector leading organic salesgrowth at 6.3% supported by very strong growth in F&N whilst S&Cexperienced a slowdown due to a mix of (largely temporary) issues. Q4 U/LEBITDA increased 17% year-on-year and was in-line with consensus despitesome one-offs. Mgmt provided a "typically" conservative outlook for 2017targeting EBITDA margin ~20%. We forecast a 100 bps improvement to 22.5%in 2017E as we expect the positive moving parts to more than offset thenegatives. The stock trades at 19.5x 18E P/E (discount to ingredients peers)which we see as attractive given the strong growth on offer. BUY.
Albemarle (ALB.N, BUY).
At an upbeat investor meeting Albemarle provided an implied 5-yr EPS CAGRtarget of 15-22%. Driving this best in class growth is lithium. Albemarleforecasts lithium demand growth 14% CAGR over the next 5 years driven bycontinued penetration of electric vehicles. This mid-teens volume growthcoupled with further price gains is expected to drive a 5-yr EBITDA CAGR12-21% in the Lithium & Advanced Materials segment (43% of ’16 EBITDA;60%- plus of ‘21E EBITDA of which ~90% is from lithium). With Albemarlereaffirming our recently reiterated positive view on Lithium (“Welcome to theLithium-ion Age 1.1”) and valuation a fair 25.4x ‘17E EPS (1.4x PEG), Buy.
