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BASF Shares Rally on First Buyback in Nearly 15 Years; Shares Undervalued

Rob Hales, CFA Equity Analyst

Analyst Note

| Rob Hales, CFA |

Narrow-moat BASF announced a EUR 3 billion share buyback to be completed by the end of 2023, the first since before the financial crisis. Shares closed up 4.5% on the day. We think the rally is more about implied BASF confidence for 2022 and a more flexible capital allocation policy rather than the valuation impact from the buyback itself. If the full buyback was completed today, our fair value estimate would rise by only around 1%. Hence, we are maintaining our EUR 73 ($22) fair value estimate. At current levels, the shares look undervalued.

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Company Profile

Business Description

Based in Germany, BASF is the world’s largest chemical company, with products spanning the full spectrum of commodities to specialities. In addition, the company is a strong player in agricultural crop protection. Given its sheer size, BASF has a top-three market position in 70% of its businesses.

Carl-Bosch-Strasse 38
Ludwigshafen am Rhein, 67056, Germany
T +49 621600
Sector Basic Materials
Industry Chemicals
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 110,672