On Thursday, Morgan Stanley (NYSE:MS) reaffirmed its Overweight rating and €75.00 price target on Akzo Nobel NV (AKZA:NA) (OTC: OTC:AKZOY), a global leader in the paint and coatings industry. The firm’s analyst provided insights on a potential sale of the company’s decorative paint business in India, suggesting that such a transaction could unlock significant value for Akzo Nobel (AS:AKZO).
According to InvestingPro data, the company’s stock is currently trading near its 52-week low of $19.05, suggesting potential upside opportunity. InvestingPro analysis indicates the stock is currently undervalued.
The analysis indicated that a sale of Akzo Nobel’s Indian decorative paints division might represent approximately 5.5-9.2% of the company’s current market capitalization of $9.96 billion, after accounting for any earnings lost due to the divestment.
The decorative paints segment is estimated to contribute around 85% of Akzo India’s sales, with a robust mid-to-high teens EBITDA margin, equating to an EBITDA of approximately €60 million. InvestingPro subscribers can access detailed financial metrics, including the company’s total EBITDA of $1.45 billion and comprehensive health scores showing GOOD overall financial condition.
Morgan Stanley applied a 25-35x EV/EBITDA multiple to this figure, a range based on the lower end of Akzo India’s historical multiples and the higher end of the market leader Asian Paints (NS:ASPN)’ 25x multiple. This calculation suggests a potential value of 9.3% to 13% of Akzo Nobel’s current market cap. However, when considering the EBITDA that would be divested, the net value is estimated to be slightly lower.
The firm also compared its estimates with the reported potential sale figures of $2.1-2.5 billion from Mint, concluding that such a deal could imply a net gain of 12.9-16.1% for Akzo Nobel. Despite these calculations, Morgan Stanley observed that the market appears hesitant to factor in any potential value realization from the sale into Akzo Nobel’s share price. The analysis concluded without speculating on the market’s reasons for this or the potential impact on the company’s future financial performance.
In other recent news, Akzo Nobel NV has been the subject of positive analysis from major investment firms. JPMorgan upgraded the stock from Neutral to Overweight, setting a price target of EUR70.00. The firm’s optimism is rooted in expected EBIT growth, projected to increase by 9% annually in 2025 and 2026, bolstered by cost savings and improved demand trends. Additionally, a favorable outlook for raw material prices, particularly oil, is expected to benefit the company.
Simultaneously, Redburn-Atlantic initiated coverage on Akzo Nobel with a Buy rating and a price target of €80.00. This assessment follows a period of underperformance of Akzo Nobel’s shares compared to the Stoxx 600 index. The firm outlined three potential scenarios for the company’s future, including streamlining the supply chain, becoming an acquisition target, or attracting the attention of activist investors.
These recent developments indicate a positive outlook for Akzo Nobel from both JPMorgan and Redburn-Atlantic, based on anticipated EBIT growth, cost savings, and strategic changes.
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