AlsterResearch AG Initiation: Wacker Chemie AG - Strong 2021, but fully valued

Wacker Chemie AG (Initiation)   Chemicals MCap EUR 7.8bn HOLD PT EUR 149.00 (-6% potential)   Strong market positions and top line growth of almost 30% in 2021 surely look attractive. However, valuation suggests that the markets give Wacker a lot of credit in sustaining some of the profitability gains of the last quarters, which is not a foregone conclusion.   Read

What’s it all about?

Wacker has a worldwide leading market position in polymers and is among the market leaders in silicones and polysilicones. However, these strong market positions in the past have not translated into sufficient margins, as Wacker has time and again failed to cover its cost of capital. This is about to change in 2021 on the back of strong pentup demand, for example from the solar and semiconductor markets. Recent guidance has confirmed top line growth of almost 30% for 2021. So far Wacker has successfully passed on steep raw material inflation, for example in Methanol, Ethylene and Si-Metal, to customers via price increases and surcharges. However, this could become a risk factor once capacity in the industry becomes less tight. Valuation suggest that the markets give Wacker a lot of credit in sustaining some of the profitability gains of the last quarters. Based on DCF, we recommend to HOLD with PT EUR 149.00.