Jefferies has adjusted its stance on Evonik Industries AG, moving the German specialty chemicals group from an "underperform" rating to "hold" while increasing its target price to €15.10 from €12.20. The brokerage attributed the change to easing supply-side pressures and a recent dividend reset, but it warned that a meaningful uplift in overall demand remains absent.
At the time the note referenced the stock's market level, Evonik shares were trading at €17.27 on Monday as of 07:07 ET (11:07 GMT), which places Jefferies' new target at about 12.6% below that price.
On earnings expectations, Jefferies nudged its fiscal 2026 EBITDA forecast up by 3% to €1.86 billion, while trimming its fiscal 2027 EBITDA estimate slightly to €1.85 billion. Across its forecast horizon the brokerage's EBITDA projections run approximately 4-5% under consensus, reflecting a deliberately cautious view on how quickly a cycle recovery might unfold.
A central focus of Jefferies' analysis is methionine - a key feed additive for which spreads have surged. The brokerage noted that methionine spreads at the time of publication were more than 90% above their medium-term average, driven by recent price increases and temporary force majeure events. Jefferies quantified sensitivity to methionine pricing, estimating that each €0.1/kg move equates to about €60 million of EBITDA impact. Year-to-date methionine prices were running €0.7/kg higher than the FY25 average, and Jefferies' base case assumes a recovery of methionine prices toward a longer-term average of €2.4/kg.
"While some normalisation is likely, we expect pricing to remain more resilient than previously assumed given the largely contractual nature of the market," Jefferies said.
Upstream dynamics also factored into Jefferies' view. A recent spike in oil prices has pushed C4 spreads back toward mid-cycle levels, which the brokerage said represents a mid-single-digit percentage annualised tailwind to FY26 group EBITDA. Management had identified the C4 business as non-core in 2022; Jefferies noted that a successful disposal of that business would likely deliver around 0.4x leverage relief. Although firmer C4 spreads broaden optionality for the company, Jefferies stopped short of calling these moves a structural re-rating catalyst.
In valuing Evonik, Jefferies averaged a discounted cash flow valuation of €12.40 per share with a sum-of-the-parts (SOTP) valuation of €17.80 per share. The SOTP applied a 6.2x EBITDA multiple to the Custom Solutions unit and a 7.9x multiple to Advanced Technologies, while deducting net debt of €2,981 million and pension liabilities of €1,490 million. On an EV/EBITDA basis, Jefferies calculated Evonik was trading at a 28% discount to peers, which is wider than the three-year average discount of 17%.
Following Evonik's dividend reset, Jefferies projected dividend coverage above 200% from FY27 onward, up from a historical average around 120%. The brokerage also expects leverage to decline back below 2x from FY28. Still, Jefferies flagged governance and capital allocation as an outstanding issue, saying that the incoming chief financial officer will need to restore credibility around how capital is deployed. The analysts characterized the dividend reset as "near-term relief rather than full validation."
Jefferies identified several catalysts to watch: the group's Q1 results due May 8, ongoing movements in methionine prices, a potential sale of remaining Performance Materials assets, and the ramp-up of organic investment projects.
In scenario analysis, Jefferies outlined an upside case of €25.00 per share predicated on methionine price inflation and peak group margins, while the downside case of €12.20 per share would reflect a slide in methionine pricing toward the Chinese cash cost of production.
Separately, automated stock-selection commentary included with the research highlighted that ProPicks AI evaluates EVKn alongside thousands of other companies every month using more than 100 financial metrics. The machine approach aims to identify opportunities based on fundamentals, momentum, and valuation, and the note referenced prior successful picks as examples. The ProPicks AI blurb offered readers the option to check whether EVKn appears in any current strategies or whether alternative opportunities exist in the same space.