Evonik: Lowers 2023 Guidance on Macroeconomic Weakness and Destocking

No-moat Evonik EVK announced preliminary figures for the second quarter and cut 2023 guidance due to persistently weak demand across all end markets and customer destocking. Second-quarter EBITDA is expected to be EUR 430 million-EUR 450 million, in line with Vara consensus. However, 2023 EBITDA guidance was cut to EUR 1.6 billion-EUR 1.8 billion from EUR 2.1 billion-EUR 2.4 billion previously, which is below the Vara consensus estimate of EUR 1.9 billion. Sales for 2023 are now expected to be EUR 14 billion-EUR 16 billion compared with EUR 17 billion-EUR 19 billion previously. Contingency measures will be enacted in the second half of the year including reducing hiring and restricting travel, which should save EUR 250 million in expenses. Furthermore, capital expenditure will be reduced to EUR 850 million from EUR 900 million previously. We were already forecasting 2023 EBITDA below consensus at EUR 1.7 billion, so we don’t expect to make a material change to our forecast or EUR 25 fair value estimate. At current levels, the shares look undervalued.