Canaccord Genuity slashes target price on Synthomer

Canaccord Genuity said Synthomer's latest set of full-year results were in line with previous expectations, confirming that excess profits earned in its nitrile business through 2020-21 were now "firmly over".

However, it noted that the rest of the business had seen "impressively stable profitability", which it expects to continue into 2022.

"We are revising forecasts materially to reflect the end of the nitrile boom, and taking, as a result, a somewhat more cautious view on valuation," said the analysts. "Nonetheless, we continue to struggle to justify the apparent multiples on Synthomer; at our new target, the stock would trade at just 10x/9x 2022E/23E EV/EBITDA, which we believe is highly attractive for a business with this level of consistency."

In particular, the Canadian bank noted that following Synthomer's acquisition of Eastman adhesives assets and Omnova, around 65% of the group's underlying earnings come from other "structurally growing specialty chemicals businesses", up from around 45% before the deals.

Despite the price target downgrade, Canaccord reiterated its existing 'buy' rating with the new target price.