Overview#

Berenberg has downgraded Arkema SA from a 'buy' to a 'hold' rating, setting a price target of €62 per share. This change comes after Arkema's shares rose 19% this year, reaching €62.30.

Market Dynamics#

Analyst Sebastian Bray highlighted that the ongoing conflict in Iran has significantly boosted acrylic acid margins in Southeast Asia, with spreads increasing from under $200 per tonne to over $900 in just a few weeks. Berenberg estimates that this surge could add more than €100 million to Arkema’s earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2026.

Future Projections#

Despite the recent gains, Bray cautioned that these improvements might be short-lived. Berenberg’s AI model, ChemCast, predicts only a 2% increase in EBITDA estimates for the first quarter of 2026, while indicating a potential 10.3% downside risk for 2027. This risk stems from expected normalization of margins as the Strait of Hormuz reopens.

Financial Adjustments#

Berenberg has revised its sales estimate for 2026 upwards by 4.6% to €9.31 billion and increased its EBIT forecast by 38.4% to €643 million. The adjusted earnings per share (EPS) for 2026 has been raised by 42.5% to €5.54, but projections indicate a negative compound annual growth rate (CAGR) of 9.6% through 2028.

Valuation Breakdown#

Using a sum-of-the-parts valuation, Berenberg estimates Arkema's enterprise value based on 2027 earnings. The Advanced Materials division is valued at €4.62 billion, while Adhesive Solutions and Coatings Solutions are valued at €2.61 billion and €1.03 billion, respectively. After accounting for debts and cash, the implied equity value stands at €4.69 billion, supporting the €62 price target based on 75.5 million shares outstanding.

Dividend and Cash Flow#

Arkema's dividend remains steady at €3.60 per share, yielding 5.8% at the current price. The payout ratio is expected to rise from 65% in 2026 to 77.2% in 2027. Free cash flow per share is projected at €7.31 in 2026, decreasing to €6.15 in 2027. Bray noted that Arkema's production volumes have not consistently grown since the mid-2010s and remain below pre-pandemic levels.