AlsterResearch AG Initiation: Lanxess AG - Time for a rerating?

Lanxess AG (Initiation)   Chemicals MCap EUR 5.2bn BUY PT EUR 86.00 (+42% potential)   Lanxess is is in the middle of a transformation process. Over the past 5 years, multiple transactions - four alone in 2021 - have realigned the product portfolio from commodities to niche specialties. This is not reflected in valuation and could be the basis for a rerating.   Read

 

What’s it all about?

Lanxess is chemicals company which is in the middle of a transformation process. Over the past 5 years, multiple transactions - four alone in 2021 so far - have realigned the product and IP portfolio from commodities to niche specialties. This process has reduced the cyclicality of the business and improved the margin and returns potential. The latest step in this journey was the formation of the Flavors & Fragrances unit, a business that could catalyze a new perception of Lanxess in the market. Upside potential is based on margin expansion from economic tailwinds and the portfolio realignment. More importantly, there is ample space for multiple expansion once management builds more confidence that the transformation process is bearing fruit. Based on DCF and supported by FCF yield, we calculate a fair value of EUR 86.00 and recommend to BUY