Borregaard (Buy, TP: NOK90.00) - Lignin oversupply looks priced in
We reiterate our BUY recommendation and NOK90 target price ahead of the Q3 results (due 23 October at 07:00 CET) as we believe the shares are pricing in a permanently too-low lignin market. We have lifted our 2019–2020 estimates slightly due to FX. For Q3 we forecast clean EBITA of NOK170m, down 16% YOY, largely driven by higher raw material costs.Borregaard is a supplier of specialized biochemicals for a global customer base. Co.'s main products are lignin-based products and specialty cellulose, but its product portfolio also extends to vanillin, bioethanol and fine chemicals. Co.'s products serve applications in a range of global end-markets including construction, agriculture, food and beverages, transportation and pharmaceuticals. Co.'s business model is closely linked to the integrated nature of its biorefinery in Norway, which utilizes the wood components to produce a portfolio of products. Co. operates in three business segments: Performance Chemicals, Specialty Cellulose and Other Businesses.
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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