European chemicals: Slowing demand and multiple contraction risks ahead- Baader Helvea
11/04/2019 09:26
** Baader Helvea says they "might be 1-2 months too early in
becoming negative on the sector", but believes recent
outperformance of chemical sector might be over soon
** The broker points to worsening early indicators for
chemical industry and "still close to peak multiple valuation on
close to peak margin level"
** Cuts Air Liquide AIRP.PA , Covestro 1COV.DE , Linde
LING.DE , and LANXESS LXSG.DE to "sell from "hold"
** Reduces ratings for AkzoNobel AKZO.AS , DSM DSMN.AS ,
and Nabaltec NTGG.DE to "hold" from "buy"
** The broker says it still prefers Linde to Air Liquide,
despite downgrading both due to consensus downward revision and
multiple contraction risk
** Says fears multiple contraction at late cyclical
industrial gases at Air Liquide in particular, as change in
long-term growth assumptions might hurt co's valuation
** Thinks instead Linde's share buyback should help co's
share price
** Sees multiple contraction to affect also DSM, despite
believing co is on track to prove stability and ongoing
improvement of its margins
** The broker sees downside for Covestro in 2020, citing
very low order book visibility
** Highlights stretched valuation and potential peak
margins contractions at two divisions for Lanxess
** Baader Helvea warns of further consumer confidence
deterioration for AkzoNobel, which could result in lower paint
demand
** Believes raw material tightness in the EU helps
Nabaltec's pricing power, but thinks margin development to be
already priced in
((Linda.pasquini@tr.com))