CC - Embedded Expectations Analysis - 2021 08 20
The Chemours Company (CC:USA) currently trades at a discount relative to UAFRS-based (Uniform) assets, with a 0.9x Uniform P/B. At these levels, the market is pricing in expectations for profitability to remain muted, and management may have concerns about the sustainability of demand for TI02, AVA contracts, and their market leadership position.Specifically, management may lack confidence in their ability to maintain their EBITDA margin, Advanced Performance Materials (APM) segment growth through product development, and their Assured Value Agreement (AVA) contracts volume. In addition,
they may have concerns about the sustainability of AVA pricing benefits due to inflation and the sustainability of demand for Titanium Dioxide (TI02), particularly in China. Furthermore, they may be exaggerating the leadership position of their Opteon and Nafion products, the capacity of their thermal oxidizer to reduce emissions, and the strength of their Mining Solutions business.
Chemours is a provider of performance chemicals. The company has three reportable segments: Fluoroproducts, Chemical Solutions, and Titanium Technologies. The company's Fluoroproducts segment is a provider of fluoroproducts, including refrigerants and industrial fluoropolymer resins. The company's Chemical Solutions segment is a North American provider of industrial chemicals used in gold production, industrial, and consumer applications. The company's Titanium Technologies segment is a provider of titanium dioxide pigment, a white pigment used to deliver whiteness, brightness, opacity, and protection in a variety of applications.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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