Solvay Taking a more cautious stance, lowering target price
Increased pressure in the soda ash market prompts us to take a more conservative approach with regards to contract terms for the coming years, resulting in a reduction of our group EBITDA forecasts for 2026-2028 by between 6-11%. The dividend policy of a stable to increasing dividend from a € 2.43 base looks increasingly generous as servicing the dividend representing the vast majority of current FCF generation, limiting the group's ability to pursue other growth initiatives. Despite the attractive dividend yield (9.4%) and valuation (P/E26e of 7.9x), the tough market conditions for soda ash and Coatis prompt us to lower our target price from € 36 to € 30. Given the remaining upside, we maintain our Accumulate rating.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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