On Thursday, Berenberg reaffirmed its positive stance on BASF SE (BAS:GR) (OTC: OTC:BASFY), maintaining a Buy rating and a price target of EUR50.00. The chemical giant, currently trading near its 52-week low at $10.90 and showing signs of undervaluation according to InvestingPro analysis, maintains a notable market presence with a $39.26 billion market capitalization.
The firm’s analyst highlighted that despite potential challenges such as increased tariffs and high gas costs in Europe, BASF’s short-term earnings prospects seem more promising than initially expected.
The improvement may be partly attributed to the impact of Chinese stimulus measures announced earlier in 2024 and better plant utilization across Europe. With annual revenues of $72.68 billion and a consistent dividend yield of 5.93%, BASF has maintained dividend payments for 33 consecutive years, according to InvestingPro data.
The analyst noted that most upstream chemical spreads, with the exception of Toluene Diisocyanate (TDI), experienced a favorable fourth quarter. This performance boost is believed to be linked to economic measures from China and a recovery in European manufacturing operations.
Looking ahead, the analyst anticipates that BASF’s recent move to link employee compensation more directly to the performance of individual segments rather than the overall group could have a significant impact. This change is expected to incentivize better performance within the company’s various divisions.
In addition to internal policy changes, BASF is also expected to engage in strategic portfolio management throughout 2025. The analyst mentioned the potential divestment of parts of the Coatings unit, which was detailed in a review dated July 23, 2024. Such portfolio adjustments are predicted to be well-received by the market.
Finally, the report touched upon BASF’s investment in Harbour Energy, noting that the six-month lock-up period for its 39.6% stake is set to expire in the first half of 2025. This could potentially lead to further strategic actions by BASF regarding this holding. For deeper insights into BASF’s financial health and strategic positioning, investors can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports.
In other recent news, BASF has seen a series of positive developments. Both Jefferies and Goldman Sachs have upgraded BASF’s stock from ’Hold’ to ’Buy’, indicating confidence in the company’s strategic initiatives and market position. Analysts from these firms cite potential for improved chemical spreads, increased volumes, cost reductions, and the possibility of lower European gas prices as factors contributing to BASF’s positive outlook.
In terms of financial performance, BASF reported a stable Q3 2024 sales performance of €15.7 billion, mirroring last year’s figures. The company noted a 7% volume increase, excluding precious and base metals, and a 5% rise in EBITDA before special items to €1.6 billion. These results were driven by strong performance in the Chemicals, Materials, and Nutrition & Care segments, while Surface Technologies faced challenges due to a dip in automotive production.
Despite these challenges, BASF maintains its EBITDA outlook for 2024, expecting to meet the lower end of the forecast range. The company’s cost savings program is on track to achieve €2.1 billion in annual savings by 2026, with €800 million already realized. However, net debt rose slightly to €19.7 billion, but the company maintains a solid equity ratio of 45.4%.
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