Elkem (Buy, TP: NOK40.00) - Silicon Products still riding high
We expect another strong quarter from Elkem, with Q2 EBITDA of NOK3,731m (results due at 07:00 CET on 19 July). We believe the Silicon Products division is still riding high, albeit gradually cooling, with European silicon metal and ferrosilicon prices down from their Q2 2021 peaks; we forecast divisional Q2 EBITDA of NOK2,847m. Following a longer period than expected of record profits, we have lifted our group 2022e EPS by 23%; however, we see the silicon and silicone markets calming down medium- to long term. We have therefore cut our group 2023–2024e EPS by 25% and in turn our target price to NOK40 (50), but given the potential upside, reiterate our BUY.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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