Borregaard (Hold, TP: NOK100.00) - Diversification yields stable earnings
We expect Borregaard to report Q2 EBITDA of NOK273m, with sales volumes and prices holding up well for most product categories despite turbulent markets. We see a risk of the Lignotech plant being written off and therefore estimate a relatively low Q2 EPS of NOK0.5. Our 2021e EPS estimates are largely unchanged, and we maintain our HOLD and NOK100 target price. We acknowledge Borregaard’s well-diversified earnings growth, but believe that much of this is priced in at a 2021e P/E of 16x.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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