Solvac Significant discount widening presents buying opportunity
Since the start of March 2024, Syensqo has risen by 8.0% while Solvay has rallied 28.0%. However, in stark contrast to its underlying investments, Solvac has declined by -2.8% during the same time period. As a result, we estimate Solvac's discount to have widened to 38.4% which is much higher that the 2yr and 5yr average discount(s) of 24.3% and 20.7% respectively. While lower volumes in the name could be one reason, we also believe that the market has not fully re-calibrated its view of Solvac as having significant stakes in a legacy business with dominant market positions and in a chemicals business that has strong growth prospects. We think that Solvac's discount will contract back to its historical average and see the current situation as a buying opportunity. After having updated our model and applying a 30.0% discount to our est. TEV of €222.9ps, we slightly lower our TP from €160.0 to €155.0 but raise rating to BUY.Solvac is a holding company. Through its subsidiary, Solvay, Co. is active in Chemistry. Co. manufactures and sells chemicals and plastics products. Its operations can be divided into two business segments: Chemicals and Plastics. In the Chemicals Sector, Co.'s produts are divided into four clusters which are the Minerals cluster; the Electrochemistry and Fluorinated Products cluster; the Oxygen cluster; and the Organic cluster. In the Plastics sector, Co.'s products can be divided into 2 different clusters which are Specialties and Vinyls. The Specialties cluster comprises Specialty polymers and Inergy Automotive Systems. The Vinyls cluster comprises Vinyls and Pipelife.
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