Chemicals
Concern Stirol: 180-Degree Turnaround - We expect Stirol to cross its lossmaking curve decisively in 2011, posting a net margin of 12% and a healthy net profit of USD 81mn. The company’s stock price rode a wave of improving market sentiment and a change in ownership to gain 67% in 2010. We see further share price growth occurring on the back of bullish motion on the fertilizer market and a 146% YoY rise in Stirol’s output, to 2.5mn tonnes in 2011. However, we believe that in the medium term, the company’s margins will be squeezed by rising costs. Stirol currently trades at 2011E P/E of 3.2x and 2011E EV/EBITDA of 1.9x. We initiate coverage of the STIR stock with a BUY rating and a target price of USD 14.7 per share, implying an upside of 51.5%.
