LONDON (dpa-AFX) - According to the investment house Jefferies, the chemical sector, which has been badly hit recently, is showing signs of recovery overall. "Feeling alive in 25!" was the headline from Chris Counihan in an analysis published on Wednesday. The expert believes that the sector should regain momentum. However, he is not equally optimistic for all companies.

The prospects for broad-based chemical groups and producers of commodity chemicals appear better for the first time in three years, wrote Counihan. Profitability in manufacturing is improving and, in view of the still very low capacity utilization of production facilities, any recovery in demand and a resulting increase in capacity utilization would have a strong impact on profits. In addition, many companies have done their homework on the cost side and are now much more flexible here.

With regard to BASF, the expert sees additional potential if the DAX-listed company's strategy of gradually breaking up the Verbund structure works out. This would be the biggest change in strategy for more than a decade. This is another reason why he raised the price target from EUR 43 to EUR 53 and recommended the shares as a buy.

In contrast, the analyst is more cautious about the shares of Essen-based specialty chemicals group Evonik despite the improved prospects for the sector. He lowered the target price from 21 to 16.60 euros, now sees risks and downgraded the shares to "underperform". Evonik's management has done a good job in the industry crisis and has proven the robustness of the business. However, other chemical companies currently have higher profitability (product spreads) and more strategic potential. He highlights BASF and Arkema in particular, which have been able to generate more profit momentum.

Counihan also favors industrial gas manufacturers such as Air Liquide over consumer-dependent companies such as Symrise for the coming year. He changed his rating for Air Liquide from "underperform" to "buy" and raised the target price from 151 to 190 euros. Prices and margins provided momentum.

In contrast, he withdrew his "buy" recommendation for flavor manufacturer Symrise and cut the target price from 134 to 120 euros. Although he remains above consensus even with lower estimates, he fears that the cost-cutting measures announced at the capital market day will be at the expense of growth.

The expert responsible for K+S, Charlie Bentley, now has an "underperform" rating and has lowered the target price from EUR 11 to EUR 8. The outlook for the agricultural sector remains difficult overall and there are increasing operational risks for the fertilizer producer K+S./mis/ag/stk

Publication of the original study: 12.11.2024 / 11:50 / ET

First distribution of the original study: 12.11.2024 / 19:00 / ET