UBS has downgraded BASF SE (BAS: GR) (OTC: OTC:BASFY) to Neutral from Buy, adjusting the price target to €48.00 from €51.00.
The change in rating follows a comprehensive review of the chemical group's anticipated earnings trajectory over the next five years, taking into account the company's newly revealed strategy during its recent Capital Markets Day (CMD).
The firm anticipates a challenging year ahead for BASF, with expectations of lower global GDP growth in 2025, especially in significant markets such as China and the United States.
The analysis also pointed to continued low capacity utilization and a weak agricultural end market as key factors likely to impact the company's performance. These conditions could lead to potential downside risks to BASF's EBITDA guidance for 2024 and 2025.
UBS noted that while some relief for BASF may come from lower interest rates and planned cost savings, estimated to be around €2.1 billion by 2026, it is still premature to predict the advantages from the significant portfolio changes presented at the CMD. The report suggests that these strategic shifts have yet to manifest tangible benefits.
The analyst's assessment concludes that BASF's shares are currently trading at a valuation that aligns with the average premium to its European diversified industry peers over the past five years.
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