Elkem (Hold, TP: NOK27.00) - Silicones set to be softer for longer
We expect Q2 EBITDA of NOK1,175m (10% below consensus), reflecting a persistently weak Chinese silicones market. The DMC price has continued downward QTD to RMB14,000/t, and we expect Silicones’ divisional Q2 EBITDA to be NOK-216m. Still, we believe Silicon Products and Carbon Solutions will contribute to solid results, with divisional EBITDA of ~NOK1.1bn and NOK330m, respectively. We have cut our 2024–2025e EPS by 26–21%, reflecting a delayed recovery in the Chinese silicones market. Combined with the recently paid NOK6 DPS, we reiterate our HOLD but have cut our target price to NOK27 (37).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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