BAS: Coatings Divestiture And Buyback Program Will Support Medium-Term Upside

Analysts have modestly raised their price target for BASF to EUR 52, citing a stronger than expected valuation for the coatings divestiture and a higher anticipated future P/E multiple, despite slightly slower revenue growth and lower margin assumptions.

Analyst Commentary

Analyst feedback on BASF reflects a predominantly constructive outlook following the coatings divestiture and the reset in valuation expectations.

Bullish Takeaways

• Bullish analysts highlight that the coatings sale price came in ahead of expectations, reinforcing confidence in underlying asset quality and supporting the higher EUR 52 price target.
• The resumed Buy rating is seen as validation that the portfolio reshaping strategy can unlock further value, particularly if additional non core assets are monetized on similarly attractive terms.
• Stronger conviction in a higher future P/E multiple is tied to improved capital discipline and a clearer focus on core businesses, which could drive a re rating as earnings visibility improves.
• Peers considering potential spin outs of agricultural businesses are viewed as an incremental positive for sector multiples, with BASF potentially benefiting from a more favorable relative valuation backdrop.

Bearish Takeaways

• More cautious analysts note that the stronger valuation for the coatings business may set a high bar for future divestitures, increasing execution risk if subsequent deals price less favorably.
• Slower revenue growth and softer margin assumptions temper the upside case, suggesting that the raised target multiple will require disciplined cost control and delivery on restructuring plans.
• Uncertainty around regulatory and macro headwinds in key end markets limits near term visibility, which could constrain multiple expansion despite recent portfolio moves.
• Comparison with peers exploring larger scale structural changes, such as full Ag carve outs, raises questions about whether BASF is moving fast enough to close the valuation gap within the sector.

What's in the News

• Citi resumed coverage of BASF with a Buy rating and EUR 52 price target, citing the coatings sale price as ahead of expectations and supportive of the upgraded valuation framework (Citi, periodical).
• Carlyle is reportedly nearing a roughly EUR 7 billion deal to acquire BASF's coatings business, having entered exclusive talks after outbidding rival private capital groups (Financial Times, periodical).
• BASF launched a major share buyback program of up to 78.3 million shares, aiming to return capital to shareholders, cancel repurchased shares, and improve EPS while reducing net debt by mid 2026 (company announcement, key development).
• BASF is consolidating its Asian PolyTHF business into its Caojing, China site and discontinuing production in Ulsan, South Korea by 2026 as part of its Winning Ways competitiveness strategy (company announcement, key development).
• BASF is exploring small to midsize acquisitions of up to around EUR 2 billion, while keeping large scale deals off the agenda in the near term (management commentary, key development).

Valuation Changes

• Fair Value: Unchanged at approximately €48.0 per share, indicating that the updated assumptions offset each other at the valuation level.
• Discount Rate: Risen slightly from about 6.26 percent to 6.27 percent, reflecting a marginally higher required return.
• Revenue Growth: Fallen significantly from roughly 1.46 percent to 0.72 percent, implying a more subdued top line outlook.
• Net Profit Margin: Reduced modestly from around 4.44 percent to 3.99 percent, pointing to somewhat lower expected profitability.
• Future P/E: Increased meaningfully from approximately 17.2 times to 19.6 times, signalling higher anticipated valuation multiples despite softer growth and margin assumptions.