Lovin’ You To Pieces – A Tough Setting To Unlock Value, But Still Likely The Right Move For BASF!

Daily Chemical Reaction

Lovin’ You To Pieces – A Tough Setting To Unlock Value, But Still Likely The Right Move For BASF!

Key Findings

• General Thoughts: The equity valuation discount at BASF based on a sum-of-the-parts analysis using its peer group has been significant for many years – management may now be positioning to take action to unlock this value.
• Supply Chain/Commodities: We highlight our takeaways from the Arcadium Capital Markets Day this week that keep our lithium market concerns elevated and discuss Brazil’s plans to lift polymer and chemical import tariffs.
• Energy/Upstream: US refinery margins are sitting near their YTD lows, down more than 50% from their YTD highs, and we discuss this setting in light of a struggling global refining industry dealing with loosening market conditions.
• Sustainability/Energy Transition: We discuss US DOE efforts to build a domestic battery supply chain, US battery producer incentives dwarfing those in Europe, and both struggling to counter China’s dominance in this area.
• Downstream/Other Chemicals: We highlight the Microsoft deal with Constellation Energy to invest and reopen its Three Mile Island Nuclear plant and the increasing delays among electricity suppliers to meet surging demand.

Exhibit 1: BASF’s Consensus Estimate Derived EV/2024E EBITDA Valuation Reflects A Multiple Comparable To The Diversified Chemical Sector Average, Suggesting The Market Gives It Little-to-No Benefit For Its Agriculture Business.

Source: Bloomberg, C-MACC Analysis, September 2024

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