On Friday, Kepler Cheuvreux resumed coverage on IMCD NV (AS:IMCD:NA) with an optimistic outlook, upgrading the stock to a "Buy" from a previous "Hold" rating. The firm also increased the price target to €179.00, up from €148.50. According to Kepler Cheuvreux, the decision comes after a hiatus linked to IMCD's €300 million capital increase.
IMCD, recognized as a leading global distributor of specialty chemicals, has demonstrated a strong execution track record since its initial public offering in 2014. This performance is evidenced by its 19% annual Total (EPA:TTEF) Shareholder Return (TSR), which has been supported by a 19% compound annual growth rate (CAGR) in reported Earnings Per Share (EPS).
The firm's competitive edge is maintained by significant barriers to entry due to its scale advantages in a notably fragmented industry. Although IMCD experienced a phase of consolidation in organic EBITA growth, with a decrease of 7% and 3% in the expected years 2023 and 2024 respectively, and below-average shareholder returns at 3% TSR per year for the same period, Kepler Cheuvreux anticipates a positive shift.
The analyst at Kepler Cheuvreux projects that growth for IMCD will pick up pace, forecasting a 10% and 14% organic three-year EBITA and EPS CAGR, respectively. Additionally, the potential for earnings-per-share enhancing mergers and acquisitions in the short term is highlighted, with an estimated 11-18% annual EPS growth potential.
IMCD's new price target is derived from a Discounted Cash Flow (DCF) analysis that includes potential mergers and acquisitions, setting the target at 18 times the estimated 2025 Enterprise Value to EBITA (EV/EBITA). The firm's optimistic stance reflects an anticipation of favorable risk-reward dynamics, as IMCD is poised to accelerate its growth trajectory.
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