SYNT: Self-Help Actions Will Drive Earnings Recovery Despite Neutral Market Sentiment

Analysts have trimmed their price target on Synthomer slightly. This reflects a modest recalibration in fair value to approximately £1.34 per share following a series of recent target cuts that have reset expectations for the stock.

Analyst Commentary

Recent commentary from JPMorgan underscores a more cautious stance on Synthomer, with successive reductions in the price target to 102 GBp from 200 GBp earlier in the year. Despite the cuts, the Neutral rating signals that analysts see both upside and downside risks, largely balanced around execution on the company’s turnaround strategy and end market recovery.

Bullish Takeaways

• Bullish analysts note that the maintained Neutral stance, rather than a downgrade to a more negative rating, suggests that the current valuation already reflects a substantial amount of recent bad news.
• There is optimism that operational improvements and disciplined cost management could drive margin recovery, supporting the potential for re rating if demand stabilises.
• Analysts highlight that a clearer path to earnings normalisation, particularly as destocking pressures ease, could justify upside from the current, more conservative price targets.
• The step down in targets is viewed by some as resetting the bar to a more achievable level, which may allow Synthomer to outperform if execution on strategic initiatives exceeds expectations.

Bearish Takeaways

• Bearish analysts emphasise that two successive price target cuts, from 200 GBp to 112 GBp and now to 102 GBp, indicate persistent concerns over visibility on volume recovery and profitability.
• There are ongoing worries that weaker than expected end market demand could limit near term earnings growth, constraining any meaningful re rating in the share price.
• Some see the reduced target as reflecting structural challenges in Synthomer’s portfolio, including potential pressure on pricing power and returns across key product lines.
• The continued Neutral rating, despite lower targets, is interpreted as a signal that upside catalysts are not yet clearly identifiable, leaving the risk reward profile relatively unexciting in the short term.

What's in the News

• Issued earnings guidance for 2026, expecting progress in Group earnings and cash generation driven by full year benefits from self help actions and product investments (company guidance).
• Formed a strategic partnership with Lummus Technology to license Synthomer's proprietary acrylic acid esters technology, leveraging Lummus' global licensing platform and customer network (company announcement).
• Partnership with Lummus targets robust acrylic acid esters production solutions using a variety of raw materials, including bio based feedstocks, supporting higher performance applications and potential sustainability benefits (company announcement).

Valuation Changes

• The fair value estimate has risen slightly to approximately £1.34 per share, up from about £1.34 previously, reflecting a marginal uplift in the modelled equity value.
• The discount rate remains unchanged at 13.19 percent, indicating no revision to the assumed risk profile or cost of capital.
• Revenue growth assumptions have fallen slightly, with the long-term growth rate moving from roughly 1.86 percent to about 1.84 percent.
• Net profit margin expectations are effectively unchanged at just over 10.09 percent, signalling stable assumptions for long-term profitability.
• The future P/E multiple has risen slightly from around 1.57x to about 1.58x, implying a modestly higher valuation multiple on expected earnings.