Jefferies sees 2023 fraught with risks for European chemicals
09/12/2022 08:34
** Jefferies says European chemicals stocks enter 2023 with
the greatest relative risk in a decade, as some players face
lower volumes on high energy costs, and uncertain U.S.-China
trade could disrupt demand and supply
** The broker notes energy-intensive commodity players have
only gradual ability to cut reliance without volumes dropping;
cuts Air Liquide AIRP.PA to "underperform" from "buy" on
volumes risks in its Industrial Merchant unit
** Air Liquide shares drop 2%, among worst performers on
France's blue-chip CAC 40 index .FCHI
** The uncertainty of U.S.-China relations is a risk, the
broker says, as possible U.S. sanctions could hit demand or
limit supply of chemicals such as polyurethanes
** China's easing of lockdowns can be a demand tailwind for
China-exposed stocks, like Jefferies' preferred pick Covestro
1COV.DE ("buy")
** Akzo Nobel AKZO.AS and Arkema AKE.PA (both "buy")
benefit from favourable pricing in the context of raw material
costs, the broker says
** In consumer chemicals, Jefferies prefers DSM DSMN.AS as
the "cheapest quality name" after the Firmenich takeover deal,
Symrise's SY1G.DE growth-supporting pet food exposure, and
China demand tailwinds for Croda's CRDA.L LifeSciences
business (all "buy")
** It also likes Treatt's TET.L 's ("buy") "very
reasonable" valuation and the structural growth of its
speciality ingredients end-markets
(Reporting by Olivier Sorgho)
((Olivier.Sorgho@thomsonreuters.com))