High energy prices, write-downs in the Russian business and #recession worries – the challenges BASF is currently facing are many and varied. When the the world’s largest chemical producer by sales presented its latest quarterly figures at its Annual General Meeting at the end of April, shareholders were forewarned.
In fact, sales in the first quarter fell by 13 percent to around 20 billion euros. Adjusted EBIT fell by more than 30 percent to 1.9 billion euros. Nevertheless, profit rose by 28 percent to 1.6 billion euros, although a special effect from the previous year also played a role here. BASF shares lost around ten percent in value after the Annual Meeting, and are roughly on a par with the previous year. Nevertheless, BASF started the year better than many analysts had expected, according to Group CEO Martin Brudermüller. Due to the more difficult business environment, BASF’s management already announced a savings program last year with the aim of reducing annual costs by more than 500 million euros. The company plans to cut 2,600 jobs, including 1,800 in Ludwigshafen, main production and headquarters.
Even though the current environment is of course difficult for a cyclical company like BASF, the company is looking ahead: According to the European Patent Office (EPO), BASF ranked eighth among the strongest patent applicants in Europe in 2022 with 1401 patents – 3 places better than in 2021. The Quant IP analysis confirms the picture: The Quant IP Innovation Score has improved successively in recent years and is currently over 60. The Quant IP Innovation Count has been around 1000 per year for years and a technology disruption index of 74 indicates that BASF SE is well suited to withstand disruptive technology forces.
In view of this innovative strength, but also the otherwise interesting key figures – the P/E ratio is just under 8 and the dividend yield is over 8 percent – the share is currently very attractive. The average price target of analysts is a good 54 euros – around 17 percent above the current price. BASF should benefit from the gradual recovery of the #Chinese economy. If the Chinese economy picks up speed again, BASF’s share price should rise significantly.
Conclusion: Since the company is taking the necessary measures in the current tense situation and at the same time is focusing on the future with high innovative strength, BASF stock offers an attractive risk-reward profile.