Company Reports

Narrow-moat Syensqo reported first-quarter 2024 underlying EBITDA of EUR 363 million, 23% lower than the prior year, but slightly ahead of EUR 349 million company-compiled consensus. Net sales were down 8% on a like-for-like basis, primarily driven by the expected lower pricing in the consumer and resources and specialty polymers businesses. Still, the first-quarter EBITDA margin of 22.3% represents a sequential improvement compared with the 18.7% reported in fourth-quarter 2023, attributed to an improvement in gross margin and stronger volume momentum. Given this sequential improvement—which is expected to continue in the second quarter—management confirmed full-year guidance, calling for 2024 underlying EBITDA in the range of EUR 1.4 billion-EUR 1.55 billion. This is aligned with our forecast and we therefore confirm our EUR 115 fair value estimate. Shares are undervalued at current levels.

We are initiating coverage of Syensqo with a EUR 115 fair value estimate, narrow moat rating, Medium Morningstar Uncertainty Rating, and Standard Morningstar Capital Allocation Rating. Syensqo’s spinoff from Solvay was completed in December 2023. The new firm is a leader in high-performance polymers, composite materials, and specialty surfactants. Its broad product offering benefits from megatrends such as "lightweighting" (using lighter materials to improve fuel-efficiency) for aerospace and autos, electrification, and sustainable sourcing.

Belgium-based Syensqo was spun out of Solvay in 2022 as a new specialty chemicals leader and is focused on high-performance polymers, composite materials, and specialty surfactants. The separation was finalized in December 2023, marking the beginning of Syensqo's growth strategy for 2024-28. During this period, the company should see strong demand on the back of megatrends such as "lightweighting," electrification, advanced connectivity, and sustainable sourcing. Syensqo aims to deliver organic sales growth of 5%-7% on average, a mid-20s EBITDA margin, and midteen returns on capital employed, while maintaining a healthy balance sheet. The company prioritizes customer partnerships, value-based pricing, and cost reductions, including site optimization and manufacturing efficiency enhancements.