Morningstar | Evonik's Soft PMMA/MMA Outlook Overshadows Solid 3Q Results; Shares Undervalued
No-moat Evonik reported third-quarter EBITDA of EUR 692 million, up 8% over 2017 and in line with consensus and our expectations. It confirmed 2018 guidance. Despite solid results, the stock is trading down 4% at time of writing, the weakest in the group. We think the negative reaction in the share price probably reflects the first signs of normalization in the polymethyl methacrylate/methyl methacrylate markets, which have been overearning for an extended time. Evonik reported that supply was more balanced in PMMA/MMA with a less overheated market outlook. PMMA competitor Arkema reported a similar outlook Nov. 6, and its stock is also trading down. Evonik's shares are reacting more negatively than Arkema’s, which may reflect the fact that Evonik recently started a sale process to divest itself of its PMMA/MMA business. With the long-anticipated normalization in these products now on the near-term horizon, market expectations for the potential sale price of Evonik’s PMMA/MMA business will probably compress. We have been calling for the normalization in PMMA/MMA for some time, which is reflected in our 2019 forecast for EBITDA in the performance materials segment to fall. Hence, we don’t expect to make a material change to our EUR 32 fair value estimate. At current levels, the shares look undervalued.Nutrition and care EBITDA increased 13% over 2017 with a strong 5% increase in volume and improved margins. Improving product mix was cited as a driver, which probably reflects increased sales of specialties and actives in the personal-care business line. Methionine also looked positive with demand reported to be robust and prices stable in local currencies.
Resource efficiency EBITDA increased 9% over 2017 with improving margins. This is a good result, given that volume was down 2%, a result of a high comparable and production levels moving towards maximum capacity. Similar to peers, Evonik reported weakness in auto-related end markets towards the end of the quarter. On the bright side, demand for waterborne coatings in China remained high, and the company noted seeing the first signs of a recovery in wind markets.
Steag, through its subsidiaries, is engaged mainly in power generation and related industries. Co.'s business is divided into five units: Power generation, Decentralized Energy Supply, Foreign Power Plants, Gas Distribution, and Coal Trading.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.