DNB Markets - Nexam Chemical: A step in the right direction

Performance Chemicals returned to growth in Q3 and beat our sales estimate by 19%. Group sales, however, were only slightly above our forecast due to lower than expected Performance Masterbatch sales. Still, we find the Q3 results promising as we consider Performance Chemicals a key growth driver. Reactive Recycling appears on track; we view the segment as a future cornerstone of Nexam Chemical. We reiterate our fair value of SEK13–17.

Q3 results. While group sales were slightly above our estimate, Performance Chemicals' sales exceeded our forecast by as much as 19%. Group organic growth was partly driven by volumes and partly price (50/50 split for Performance Chemicals as well as Performance Masterbatch). Performance Masterbatch's sales were 13% lower than we expected, but we still consider the increase of 9% YOY solid given that the global masterbatch market is growing c4–5% annually (according to Nexam).

Reactive Recycling. With the Q2 report, the company said 25 potential customers were evaluating its Reactive Recycling solutions. In Q3, it said that number had increased (but did not specify). Management appeared confident on ongoing projects, stating that at least half of the 25 projects it was working on had shown good progress in Q3. Hence, we believe order volumes could potentially accelerate quickly, and see Reactive Recycling as a future cornerstone of Nexam Chemical's business.

PET foam. While the wind power market has been weak in 2022, we see signs of a recovery in 2023. Nexam Chemical's PET foam business also seems to have started to recover (DIAB accounted for c15% of total sales in Q3 versus c10% in Q2), which we consider encouraging as we see it as one of the company's major growth drivers (the other being Reactive Recycling).

Fair value of SEK13–17 reiterated. We have raised our 2022e sales for Performance Chemicals by 9% but lowered our forecast for Performance Masterbatch by 7% (leaving our group 2022e sales roughly unchanged). We have raised our 2023–2024e sales estimates slightly to reflect some growth in Reactive Recycling.

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Hanna Lindbo | DNB Markets | Equity Research | Capital Goods

DNB Bank ASA, Filial Sverige

Visiting address: Regeringsgatan 59, Stockholm

Postal address: 105 88 Stockholm

E-mail: hanna.lindbo@dnb.se|www.dnb.no