Solvay Preview FY23 - taking a more cautious stance on FY24 but BUY intact
We have decided to take a more cautious stance on the macro outlook, which resulted in a lowering of our underlying EBITDA forecasts for the coming years by 5-8%. After the recent spun off of Syensqo, Solvay is a base chemicals group with leading market and technology positions in the vast majority of its businesses. The company will be managed with a conservative financial approach, favouring dividends over aggressive growth and starting from a solid balance sheet. The stable to growing dividend flow implies a gross dividend yield of c. 10%. Other valuation ratios also look very attractive with a P/E24e multiple of c 5.8 and an EV/EBITDA24 multiple of 4.5x and prompt us to reiterate our BUY rating and € 40 target price.Solvay is engaged in chemical and plastic businesses worldwide. Co. offers chemical products such as advanced materials, barium strontium, calcium chloride, caustic soda, chlorinated products, fluor, peroxygen products, polyglycerols, precipitated calcium carbonate, soda ash, and sodium bicarbonate. It also provides specialty polymers, such as Spire ultra polymers, Solviva biomaterials, and sulfone polymers. Co. structures its activities around five operating segments: Advanced Formulations, Advanced Materials, Performance Chemicals, Functional Polymers and Corporate & Business Services, each with its own specific business model and each comprised of Global Business Units (GBUs).
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