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On Thursday, UBS analyst Shunta Omura upgraded Sumitomo Chemical Co Ltd. (4005:JP) (OTC: SOMMY) from Sell to Neutral, adjusting the price target upward to KRW385.00 from the previous target of KRW360.00. The upgrade comes after a period of underperformance for the company’s shares in relation to the TOPIX index, with a noted 15% lag over the past six months. The chemical giant, with a market capitalization of $3.94 billion and annual revenue of $16.17 billion, is currently trading at $11.68. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value assessment.
The company’s restructuring efforts, which have been underway since the second half of 2024, are cited as a key factor in the improved stock rating. Under the leadership of CEO Keiichi Iwata, Sumitomo Chemical has undergone substantial structural reforms and has seen a significant enhancement in its portfolio. These changes are expected to bolster the company’s position in the market. InvestingPro data shows the company has maintained dividend payments for 34 consecutive years, demonstrating long-term financial stability despite current challenges.
Nobuaki Mito, the senior managing executive officer who is set to become president in April 2025, has been instrumental in the company’s strategic acquisitions. His background in the agrochemicals business and his involvement in key acquisitions, such as Excel Crop Care in India, Nufarm’s South American business, and FBSciences in the US, positions him as a driving force for future growth in this area.
Omura’s commentary highlights the potential for steady profit growth in Sumitomo Chemical’s agrochemicals, semiconductors, and display businesses. The analyst suggests that if this likelihood increases, a more bullish stance on the stock could be justified in the future.
Sumitomo Chemical’s stock rating upgrade by UBS reflects the company’s ongoing efforts to restructure and the anticipated positive impact of leadership changes on its business segments. The price target increase to KRW385.00 from KRW360.00 aligns with these developments and the analyst’s revised expectations for the company’s financial performance. The stock has shown resilience with a 6.57% year-to-date return, despite challenging market conditions.
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