Analysts of bank of america reduced estimates and cut the stock price target of Braskem (BRKM5) to 55 reais, from 80 reais previously, to reflect weaker estimates for petrochemical spreads, according to a client report.
“Petrochemical spreads have been under pressure in recent months and are expected to remain weaker than previously expected in 2022-2024,” said Frank McGann and Leonardo Marcondes.
For this year, they cited that polyethylene (PE) spreads in Brazil should average approximately US$500 per ton, down 53% year on year. At the Mexicoare expected to drop 33% to $1,028 per tonne.
Regarding polypropylene (PP), the expectation is that, in 2022, the higher post-lockdown demand for home appliances and automobiles will be partially offset by the effects of lower global economic growth.
“This should contribute to relatively firm PP prices, although margins are expected to be lower than levels seen in recent years. This will be especially true for Brazilian naphtha operations.”
For them, tighter spreads will continue to be the main obstacle to earnings and investor perceptions, at a time of high oil and gas prices, which drive up the costs of the company’s raw materials – naphtha and ethane.
They also assess that demand could also be affected by weaker global economic growth.
In this context, they now predict a net profit for Braskem of 7.7 billion reais in 2022, from 11.6 billion reais before, and of 3.2 billion reais in 2023, of 5.5 billion reais. For 2024, they cut the forecast by 71%, to 1.9 billion reais.
For Braskem, they pointed out, these factors imply weaker margins, which, although below the highs of 2021, are still well above the most negative periods of the last decade.
They now estimate an Ebitda margin of 15.2% this year, rising to 14.8% in 2023, from 24.7% and 21.1%, respectively. For 2024, the projection went from 23.6% to 13.5%.
Among the factors that could counterbalance, they cited that Mexico should benefit from higher utilization rates with greater raw material availability from the US and that PVC trends are also likely to remain favourable.
The BofA team reiterated a ‘buy’ recommendation for the paper, citing favorable valuation, strong balance sheet and potential significant improvement in governance.
At around 2:30 pm, Braskem’s PNA shares fell 4.9%, at 33.60 reais each, among the worst performers of the Ibovespa, a benchmark in the Brazilian stock market, which dropped 0.4%. Earlier, petrochemical shares fell to 33.43 reais, the lowest intraday since March 2021.
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Source: Moneytimes
I am an author at Global happenings and I mostly cover automobile news. In my time working in the automotive industry, I have developed a keen interest in the latest developments and trends. My writing skills have also allowed me to share my knowledge with others through articles and blog posts.
