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Broker tips: Synthomer, Elementis

By Iain Gilbert

Date: Monday 02 Aug 2021

Broker tips: Synthomer, Elementis

(Sharecast News) - Analysts at Canaccord Genuity raised their target price on chemicals outfit Synthomer from 700.0p to 750.0p on Monday, citing a fourth upgrade to full-year guidance in a row as their reasoning.

Synthomer announced a further update to its guidance for 2021 underlying earnings in July, EBITDA, now to "above £500.0m" from previous estimates of over £450.0m.

The Canadian bank pointed out that the source of the further upgrade appeared to be broad-based.

"Overall, we now expect net EPS to be up more than 150% this year on unit margins (€/ton) roughly doubling, with the overwhelming majority of that improvement coming from the nitrile business," said Canaccord.

As a result, Canaccord, which also stood by its 'buy' rating on the stock, upgraded 2022/23 EPS estimates by roughly 8% but also highlighted "increased optionality" at Synthomer, whether from the rapid debt reduction or opportunity for further expansion.

Analysts at Berenberg raised their target price on chemicals firm Elementis from 160.0p to 180.0p on Monday, stating the group's interim results last week were only a taste of things to come for the next two years".

Berenberg expects to see steady operational delivery against a backdrop of cyclical recovery, with the incipient recovery in the chromium cycle and improving sales of colour cosmetics likely to ensure that earnings growth outpaces the industrial chemicals sector moving into 2022.

The German bank also pointed out that a recovery in earnings should be matched by a classic re-rating as debt falls.

"In short, shares have a lot to offer beyond the cyclical recovery of 2021 - something that has not gone unnoticed by would-be suitors," said Berenberg.


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