Deutsche Bank has moved Verbio into a buy rating from a previous hold, a shift the brokerage says reflects a clearer and more constructive near-term outlook for the biofuels company. The announcement accompanied an upward revision to the firm's price target, and the stock reacted strongly, climbing in excess of 10%.
Price target and market reaction
Deutsche Bank raised its target to €29.40 from €15, compared with Verbio's most recent closing price of €23.38. The rating upgrade and higher valuation mark a notable change in the broker's stance after a period in which the sector faced heightened headwinds.
Drivers cited by the analyst
Analyst Michael Kuhn identified increasing prices for greenhouse-gas (GHG) quota certificates as a central factor underpinning the revised recommendation. According to the report, the termination of a double-counting mechanism - a measure that had previously allowed less expensive imports from China - is being treated as retroactive to January 1.
The bank's analysis says that removing the double-counting concession is pushing GHG quota prices upward and is expected to bolster demand for products supplied by Verbio. Deutsche Bank described a stronger line of sight on company guidance and operating conditions, and said the regulatory changes, together with firmer quota prices, point toward a recovery in the market following a difficult stretch for the sector.
Market and sector context
Deutsche Bank framed the upgrade as driven by both regulatory relief and favorable movement in raw-material cost dynamics, which together alleviate pressures that had weighed on biofuels producers in recent periods. The brokerage interprets these factors as improving visibility on future operating performance for companies in the space.
Key takeaways
- Deutsche Bank upgraded Verbio to buy and boosted its price target to €29.40 from €15.
- Rising GHG quota certificate prices and the end of a double-counting mechanism retroactive to January 1 are cited as catalysts.
- The move reflects improved guidance visibility and easing raw-material pressures for the biofuels sector.
Risks and uncertainties
- Regulatory changes may evolve further; the report notes the end of the double-counting mechanism as a current factor but does not detail future policy moves.
- Quota price volatility could affect demand and margins for biofuels producers if expectations around GHG certificate pricing change.