Elkem (Buy, TP: NOK30.00) - Back to its roots
We have upgraded Elkem to BUY (HOLD), as we see upside potential from a possible divestiture of the Silicones business, following its announced strategic review. We believe the Silicon Products and Carbon Solutions divisions could be worth cNOK20bn, in addition to the potential cash consideration for Silicones. Cash returns should come up with sharply lower capex. In our opinion, the main risk is the divestment not materialising. Our Q4e EBITDA is NOK1.2bn, and we have raised our target price to NOK30 (20).Elkem ASA. Elkem ASA is a Norway-based supplier of silicon materials. Its operations comprise such segments as the Silicones that manufactures and sells siloxanes, a range of silicones, and a commoditized products produced by reacting silicon with methyl chloride through various chemical reactions and formulations; the Silicon Materials, which includes manufacturing and selling of various grades of metallurgical silicon and microsilica; the Foundry Products that provides metal treatment solutions to iron foundries and supplies specialty ferrosilicon to the steel industry, and the Carbon, which manufactures carbon electrode materials, lining materials and specialty carbon products for metallurgical processes. The Company serves customers in chemical, solar, electronics, aluminum, construction, refractory, oil and gas industries worldwide.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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