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On Friday, BNP Paribas (OTC:BNPQY) Exane analyst Hannah Harms upgraded shares of Solvay (EBR:SOLB) SA from Underperform to Neutral, while also increasing the price target to €32.00 from the previous €28.00. The stock, currently trading at $28.60, has shown strong momentum with a 19.4% gain over the past year. InvestingPro data reveals the stock has been trading between $22.90 and $32.70 over the past 52 weeks. The adjustment reflects a more constructive outlook on the chemical company’s mid-term prospects, particularly concerning soda ash dynamics.
Harms noted that despite the lack of immediate catalysts to boost end-market demand, the anticipated gradual ramp-up of several announced projects is expected to enhance utilization rates. This projection is set against the backdrop of supply and demand (s/d) fluctuations and the company’s positioning on the cost curve. Notably, the company offers an attractive dividend yield of 6.15%, according to InvestingPro data, providing investors with substantial income potential while waiting for growth catalysts to materialize. The revised stance is supported by proprietary analysis, which includes considerations of soda ash exports and imports, freight costs, and upcoming supply and demand additions.
The analysis suggests that full capacity from these projects is unlikely to be realized before the end of the decade, which in turn could lead to an improved mid-term outlook for the company. This has prompted the upward revision of forecasts starting from the year 2026.
Solvay SA, as a key player in the chemical industry, operates within a market sensitive to s/d changes, and its portfolio is affected accordingly. The company’s positioning on the cost curve is a critical factor in its ability to navigate these market dynamics.
The BNP Paribas Exane report concludes that, while immediate market conditions may not show significant improvement, the long-term view for Solvay is more optimistic. The analyst’s updated perspective takes into account the company’s strategic projects and their expected contribution to the firm’s financial performance in the coming years. Recent momentum appears to support this outlook, with the stock posting an 11.6% gain year-to-date. For deeper insights into Solvay’s valuation metrics and growth prospects, including exclusive ProTips and detailed financial analysis, visit InvestingPro.
In other recent news, Jefferies has maintained its Underperform rating on Solvay SA, setting a steady price target of EUR26.00. This decision comes in the wake of WeSoda’s acquisition of Genesis USA’s Soda Ash business for an enterprise value of approximately $1.4 billion. The acquisition price translates to around $350 per tonne, which is a significant benchmark for the industry. WeSoda has released its full-year 2024 results, reporting an Adjusted EBITDA per tonne at the higher end of previous estimates and projecting an improvement for 2025 due to expected lower gas costs.
WeSoda’s guidance for fiscal year 2025 includes maintaining netback pricing that aligns with current market predictions for Solvay and European contract prices. The Soda Ash market is anticipated to remain stable through the first half of 2025, with a possible slight tightening in the latter half. The recent transaction value applied to Solvay’s U.S. Soda Ash business suggests an Enterprise Value contribution of approximately €8-9 per share for this segment.
A potential medium-term concern for Solvay is WeSoda’s capacity to increase its production in the U.S. by 1 to 1.5 million tonnes, representing about 2% of global capacity. This expansion could be achieved at a relatively low cost, offering WeSoda increased flexibility for its growth plans. Solvay is expected to release its fourth-quarter earnings soon, with investors and analysts likely to closely examine the results in light of current market dynamics and industry developments.
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