Elkem (Buy, TP: NOK40.00) - Value moving upstream
We have upgraded Elkem to BUY (HOLD) and raised our target price to NOK40 (37) after lifting our 2023e Silicon Products EBITDA by 28%. While silicon production is energy-intensive, manufacturing costs tend to be stable, and we believe silicon prices are set to remain elevated due to high coal (USD120/t 12-month futures) and energy prices in Asia, prompting us to raise our 2023e EPS by 10%. However, we remain lukewarm on the value of the volatile silicone sector, where Baiinfo estimates global DMC capacity could increase up to 55% in 2022.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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