Management''s new guidance failed to inspire. However, earnings momentum should continue to move in the right direction. Wacker Chemie is also in a position to embark on a new growth strategy. We upgrade the shares to Outperform and increase our TP to EUR155 (from EUR 124).
FY21 guidance raise in line; we see tight conditions persisting into 2022
Management''s guidance raise last week confirmed EBITDA expectations for FY21. This has led to questions on whether the momentum in WCH''s shares has reached a crescendo. With pricing power returning and supply chains still tight, we believe risk is skewed to the upside in Polymers and Silicones for H2. We are positive on Polysilicon into FY22, which will help WCH sustain EBITDA at above mid-cycle levels. We are c8% ahead of consensus EBITDA for FY21/22/23.
Polysilicon tightness could persist into 2022
Political pressure is increasing in the US to take more stringent action on Chinese polysilicon producers over human rights violations. As a result, we see a greater likelihood of tight market conditions persisting. While spot momentum may fade, we forecast minimal normalisation of WCH''s polysilicon EBITDA going into FY22 and are 24% ahead of consensus for the segment.
Chemicals: pricing tailwinds and positive demand trends
WCH''s Q2 pre-release illustrated management''s ability to partially offset raw mat. inflation with price increases and support margins in Polymers. The near term demand backdrop in both Polymers and Silicones continues to look positive. Secular growth drivers in the construction industry can support mid-term performance, in our view.
Exciting opportunities for capital deployment
With new CEO Dr. Christian Hartel at the helm and proceeds from the Siltronic disposal on the way, we see value accretive opportunities for WCH to allocate cash. WCH''s CDMO business will likely be an area of focus, and rightly so. Management will hold a CMD on 24 June where we expect to hear more...
