Figma Shares Indicated To Open $105/$110
On Monday, Citi upgraded shares of Braskem SA (BRKM5:BZ) (NYSE: NYSE:BAK), shifting its stance from Neutral to Buy, while adjusting the price target to R$22.50 from the previous R$23.50. The upgrade follows the company's second-quarter earnings for 2024, which, despite showing weak figures in the petrochemical cycle, indicated signs of recovery in the industry. The revised price target reflects a valuation based on a 9.4x 2024 low-cycle enterprise value to EBITDA (EV/EBITDA) multiple, with an anticipated adjusted EBITDA of $1.3 billion for 2024.
Citi's assessment points to a positive outlook for Braskem in the forthcoming third quarter, anticipating improved year-over-year results. The optimism is attributed to expected lower SG&A expenses and enhanced performance in the Brazilian operation, particularly after the Triunfo plant's shutdown in the state of Rio Grande do Sul. Additionally, better petrochemical spreads in Brazil and Mexico are likely to contribute to the company's performance.
Citi's analysis suggests that investors could see value in Braskem's stock, given the anticipated improvements in the company's operations and financials. The adjustment in the price target to R$22.50, down from R$23.50, is based on a detailed valuation methodology and the expectations for the company's adjusted EBITDA in the coming year.
InvestingPro Insights
As Braskem SA (NYSE: BAK) navigates a challenging petrochemical cycle, the latest data from InvestingPro offers a nuanced view of the company's financial health and market standing. With a market capitalization of $2.57 billion, Braskem is a significant player in the chemicals industry. However, the company's financial metrics reveal some concerns: a negative P/E ratio of -1.51 and a high Price / Book ratio of 164.71, which may indicate an overvaluation relative to its book value. Additionally, the company's revenue has declined by 13.75% over the last twelve months as of Q2 2024, highlighting the pressures faced in the current market environment.
InvestingPro Tips underscore the challenges ahead for Braskem, noting its significant debt burden and the risk of not being profitable this year. The company's weak gross profit margins at 5.94% and the negative operating income margin of -0.28% reflect operational difficulties. However, it's important to recognize Braskem's status as a prominent player in its industry, which could offer some resilience amidst these challenges. For investors seeking a deeper dive into Braskem's prospects, InvestingPro features a total of 10 additional tips, providing a comprehensive analysis that can inform investment decisions.
Despite the headwinds, Citi's upgrade to a Buy rating suggests a belief in Braskem's potential for recovery and improvement in the coming quarters. Investors considering this stock will find value in weighing these InvestingPro insights against the anticipated operational improvements and financial outlook presented by Citi's analysis.
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