PBR - Braskem raised to Buy at HSBC on attractive valuation deal catalyst

2023-06-14 14:37:21 ET

Braskem ( NYSE: BAK ) +3.5% in Wednesday's trading as HSBC upgraded the stock to Buy from Hold, saying the stock looks attractive on mid-cycle earnings, the chemical cycle has hit bottom, and there is potential for a bidding war with two bidders now in the fray.

Braskem ( BAK ) has unique advantages as a business, HSBC's Sriharsha Pappu said; its Brazil margins are higher than those of naphtha-based peers due to its dominant domestic position and tariff protection, its Idesa cracker in Mexico has a highly competitive cost position with feedstock issues expected to be resolved by the end of 2024, and its U.S. and European polypropylene assets also have strong domestic positions.

Apollo and Adnoc submitted a proposal last month to buy 100% of Braskem ( BAK ), and Unipar recently made an offer to acquire a 34.4% stake in the company; Pappu believes Petrobras ( PBR ) would remain in the company's capital structure whichever bid, if any, ultimately succeeds.

More on Braskem:

• Financial and valuation comparison to sector peers
• Analysis: Braskem: Fade The M&A Optimism
• Stock price return: Up 32.5% YTD, down 29.5% in the past 12 months

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