Investing.com -- UBS downgraded Swiss specialty chemicals maker Ems-Chemie to Neutral from Buy after a roughly 55% rally this year, saying the earnings recovery and new growth areas it highlighted at its upgrade are now priced in.
Analyst Patrick Rafaisz raised his price target to 870 Swiss francs from 860. At the time of the upgrade, he had argued that earnings growth would resume after a period of stagnation and that Ems-Chemie was developing new verticals such as humanoid robots. "These factors have now played out and priced in," he wrote.
Ems-Chemie shares fell 1.8% in Swiss trading by 11:48 GMT.
UBS expects earnings per share to grow 6% to 7% a year, ahead of consensus but below the roughly 10% average before 2020. Margin expansion potential is limited from today's record levels, with EBIT margins above 30% versus 25% in fiscal 2015.
At about 26 times 2027 estimated EV/EBITDA, "multiples no longer offer re-rating potential, in our view, and if anything could be seen as a point of vulnerability," Rafaisz wrote.
UBS still expects a strong fourth quarter. Third-quarter organic growth of 3.8% was hit by pre-buying in the second quarter, customers drawing down inventories and slightly lower pricing. For the fourth quarter, it models organic growth above 7%, helped by pricing rising again, about 4%, as renewed input cost inflation is passed on.
That keeps Ems-Chemie on track to meet guidance, Rafaisz said. UBS forecasts 2026 sales of 2.014 billion francs, up 3% and above the 1.976 billion consensus, and EBIT of 609 million francs, up 7% and above the 592 million consensus.
For 2027, UBS assumes global auto build rates, about 60% of sales, rise 1% after a 2% decline this year. Western Europe, around half of sales, remains a drag of 2%, with growth coming from Asia, about 30% of sales.
The bank models 6.6% organic growth next year and sales of 2.17 billion francs, versus the 2.062 billion consensus.
Rafaisz said the premium to chemicals and Swiss industrial peers is justified by Ems-Chemie's return on invested capital of about 40%, versus 28% for Swiss quality peers. But with the stock up sharply, the analyst sees risk and reward as "balanced."
Original Article
UBS cuts Ems-Chemie to Neutral on premium valuation; shares slide
