📄 Extracted Text (350 words)
> Energy, Materials & Industrials Gil
Deutsche Bank
DSM - Virginie Boucher-Ferte, BUY, close €81.8, €100 tgt, 22% potential upside
• We see Nutrition (68% of EBITDA) as a key growth driver. We forecast a
DSM Nutrition organic growth now compares well to peers
9% EBITDA 2018-20E CAGR driven by cost cutting, innovation and
leverage of its broad portfolio.
10% DSM Nutntion organic growth
- A greater proportion of the Nutrition portfolio is in higher-value and
faster-growing ingredients and 'solutions' rather than just vitamins.
9%
• — — Food Ingredients organic growth average
8%
7%
•
• Up to 30% upside to 18E EBITDA forecast if vitamin price increases are 6%
sustained. 5%
4% I
- Prices are unlikely to revert fully: China's environmental policies are
3%
should give structural support in the long term. 2%
1%
■ Full exit from Materials likely, driving portfolio shift towards becoming a
0%
pure play in higher-value ingredients. 2009 2010 2011 2012 2013 2014 2015 2016 2017E
Source: Deutsche Bank. Company Data
■ M&A should drive the next phase of development. DSM is likely to use its
strong balance sheet (0.5x 17E net debt/EBITDA) to broaden its
ingredients portfolio. Lots of firepower for accretive M &A (DBe synergies 6% of sales)
- This would unlock >E20/share of value from EPS accretion and re- 3000 Net Debt (LHS) —Net Deb/EBITDA (RHS) 2.50
rating.
2500 - 2.00
• Trades on 16x 19E PIE, in line with chems but a 33% discount to 2000
15
1.50
ingredients. We believe the portfolio shift should prompt re-rating.
1.00
■ Our €100 tgt implies a 20x 19E PIE — still a 15% discount to ingredients. 1000
0.50
• Catalysts: Upside through higher value and fast growing ingredients and 500 -
"solutions". Portfolio shift optionality. 0.00
Related DB Research: -500 -0.50
()SPA: The path to E100 (and potentially more): upgrade to BUY (Boucher-Fenel 2007 2009 2011 2013 2015 2017E 2019E
nI gredients: 2018 Outlook: Recipe for successi_Boucher-Fertel Source: DIPUISCI10 Bank, Company Data
:),,ean Equity Focus -January 2018
CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0086809
CONFIDENTIAL SDNY_GM_00232993
EFTA01385523
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