Syensqo From carbon chains to value chains

Syensqo had a rather turbulent start as an independent company, with underlying EBITDA in the past two years down 24% vs the pro-forma year 2022. Negative volume/mix has been the key culprit for the disappointing recent earnings track record, due to a combination of weak macro and some businesses being hit by specific factors, such as slowing EV market growth and technology choices impacting PVDF with Aroma impacted by intensified competition. The good news is that net pricing has remained clearly positive on a 2y stack and an improvement of macro conditions at some point should benefit the earnings momentum disproportionally. In this note, we zoom in on the businesses with the highest structural growth potential, which we believe are Composites and Specialty Polymers. Composites is to benefit from an increase in airline traffic, growing airplane production rates and a solid order backlog. Specialty Polymers is to benefit from its features like lightweighting, heat & chemical resistance. Cost efficiency measures and portfolio streamlining should also be positive for the investment case. Reflecting lowered forecasts and lower peer multiples, we lower our target price from € 105 to € 90, while maintaining our BUY rating.