Semperit raised to BUY, TP EUR 25 - Stronger for longer

We upgrade Semperit to BUY from HOLD on the back of a target price increase to EUR 25 (EUR 12.5) that is fuelled by steep hikes of our earnings/CF forecasts. This not only reflects the once again raised FY 20 earnings outlook (new EBITDA range of EUR 165-200 mn, EBIT expected at EUR 195-230 mn), but also a more upbeat view on Sempermeds FY 21e prospects. The stellar pricing momentum for medical gloves and the supply-demand imbalance, despite major capacity expansion projects of Asian players, are likely to persist for some time. Demand support comes from the resurgence of Covid-19 infections around the globe and the autumn/winter period in the Northern Hemisphere being ante portas. While also the industrial segments are more resilient than previously assumed, it is primarily the skyrocketing contribution of Sempermed that made us become buyers again. We are more upbeat both with regards to trading conditions and the future disposal proceeds. The fact that the management stated that it will probably continue to run the medical division for at least nine more months before actively working on the separation implies that further cash will be spilled into the balance sheet. With earnings yet to peak (on a quarterly basis) and substantial financial leeway we think the risk-reward profile is compelling.