Celanese offers rare opportunity in U.S. Chemicals space

By Sam Boughedda

Barclays analysts raised the firm’s price target on Celanese Corp (NYSE:) to $150 from $133 per share, maintaining an Outperform rating in a note on Monday.

They told investors in their research note that Celanese offers a rare opportunity in the U.S. Chemicals space and that there is a potential pathway to $200 per share.

The analysts added that the company has “top-tier assets, high-quality management, yet a depressed share price stemming from a high-price acquisition at the peak of the cycle.”

“While there’s no ‘magic bullet’ likely in the next six months, we think operational leverage to recovering China + auto markets, strong execution from trusted management, and deleveraging into 2024/25 make it a compelling multi-year story,” they wrote.

“Almost all CE investor conversations focus on 4Q’22 / 1Q’23. We think the company has ample ability to manage through near-term headwinds; the real opportunity for long-term holders is the pathway to 2024-25, when deleveraging is nearly complete & robust FCF should start returning to shareholders,” the analysts added.

“Our ‘base case’ (assuming tepid macro conditions but solid execution on DD assets) gets us $216 share price in 2025, discounted back two years at 20%/yr (to account for high risk) it gives us our current price target of $150. Execution + global economic risks are real (our downside case gets us to $61/shr); however, we think those factors are somewhat mitigated by Celanese’s strong 10yr track record + the ability of JV/asset sale to augment deleveraging if needed (e.g. Polyplastics JV in 2020 sold for 36x reported EBITDA).”