Broker snap: UBS upgrades chemicals groups Croda, Elementis and Victrex

26th Jun 2013 09:52

UK-listed chemicals stocks were making decent gains on Wednesday morning after UBS raised its ratings for sector peers Croda International, Elementis and Victrex after meeting up with the firms over recent weeks.The broker said that it caught up with management and all agreed that while European trading remained challenging, softer comparatives are due to come in the second half."This, combined with recent share-price moves, theoretically creates a more attractive entry point. Sector valuations however remain on 15.5x price-to-earnings (PE), unchanged from January," UBS said.As for chemical additives maker Elementis, the broker said that the first-half results due on July 30th "is unlikely to be a positive catalyst" but this is more than priced in with a PE of 14.5. The broker has upgraded the stock from 'neutral' to 'buy', saying that the company's cash-generative chromium model and generous dividend policy rewards investors with returns while they wait for a cyclical uplift from a construction/industrial recovery.Meanwhile, analysts said: "Growth delivery from Croda remains in question although management was confident of growth once the Europe (38% of group sales) comparative drops out from Q3 assuming no further deterioration in demand. We see current valuations as fair however and upgrade to 'neutral' from 'sell'."Polymers firm Victrex has also been raised from 'sell' to 'neutral' on valuation grounds.