(AOF) – Arkema (+5.17% to 96.04 euros) displays one of the strongest increases in the SBF120 after UBS went from Neutral to Buy, with a price target raised from 95 euros to 120 euros. The broker anticipates a recovery in volumes leading to Ebitda growth of 8% per year over 2024-28, which would translate into an Ebitda margin of around 19% in 2028, ahead of the recently announced objective by management of approximately 18%. Its estimates show that the conversion of free cash flow should be sustainably at 50% compared to 32% historically.
UBS cites the expected normalization of investments and growth in profits for this.
For 2024, UBS forecasts volume growth of 6% year-on-year after a cumulative decline of 19% in 2022/2023. According to the broker, the recovery will come mainly from Adhesive Solutions and Advanced Materials (63% of revenues in 2022). He anticipates limited recovery in acrylic acid, which is part of Coating Solutions.
Based on its new forecasts and its new price target of 120 euros, UBS adds that the group’s implied enterprise value to Ebitda ratio is 6.6 for 2024 and the average return (2023-2026) of the free cash flow of 10%. The first ratio is in line with the historical continuity of the group’s average enterprise value to Ebitda ratio (2015-22). The analyst believes that the current stock discount is not justified given the expected recovery in Ebitda in 2024 and the double-digit free cash flow yield offered by the stock.
© 2023 Agence Option Finance (AOF) – All reproduction rights reserved by AOF. AOF collects its data from the sources it considers the safest. However, the reader remains solely responsible for their interpretation and use of the information made available to them. The reader must therefore hold AOF and its contributors harmless from any claim resulting from this use. Agence Option Finance (AOF) is a brand of the Option Finance group
Did you like this article ? Share it with your friends using the buttons below.
