Chemical stocks can be volatile enough in their own right, as they
are sensitive to the prices of key inputs like oil (naphtha) and natural
gas and demand is typically tied to economic growth. Braskem (BAK)
seems to offer additional risks, as investors worry about the impact of
electricity rationing on the Brazilian economy and the company's
competitiveness with gas-based cracking capacity.
Questions about
the health of the Brazilian economy are valid, as the company has about
two-thirds share in Brazil and over half of its sales go into this
economy. Even so, the market appears to be overdoing it and the discount
to other chemical companies seems to wide to ignore. I believe that
fair value for Braskem starts around $20 today, making this is a notably
undervalued play on Brazil's underlying economic growth as well as
operational improvements that could improve the company's product
portfolio and cost structure in the coming years.
Click this link for more:
Fear Driving The Braskem Trading And Obscuring The Value
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