Elkem (Hold, TP: NOK35.00) - Not an ROE 25%+ business
Not an ROE 25%+ business We have lifted our 2022–2023e EPS by 20%, given the rise in silicon and ferrosilicon prices, while we have also increased our silicones estimate from RMB21,000/t to RMB22,000/t on strong prices. We have thus raised our target price to NOK35 (30). We reiterate our HOLD, as we believe the stock is fairly priced at these levels. We expect the silicones price to come down from current highs of RMB29,000/t, as we believe the barriers to entry for silicones producers are not high enough to block out new capacity at current margins.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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