Kepler Cheuvreux’s most recent analysis of the chemicals sector identifies BASF and Bayer as the top selections, with both firms carrying Buy ratings despite distinct near-term challenges. The research emphasizes the appeal of companies with resilient fundamentals and clear strategies amid a sector navigating economic and regulatory pressures.
BASF - Buy, 12-month target EUR56
In Kepler Cheuvreux’s ranking, BASF holds the position of "Most Preferred Stock" in the chemicals universe. The broker highlights valuation metrics that, in its view, make the stock an attractive buy: BASF is forecast to trade at a 2026E price-to-earnings ratio of 13.5x, compared with 15.6x for the broader traditional chemicals peer group. Both discounted cash flow (DCF) and sum-of-parts (SOP) valuation approaches converge on a 12-month price target of EUR56, implying upside in excess of 20% from current levels.
Kepler notes that as the world’s largest chemicals company by scale, BASF stands to gain materially from any marked sequential recovery in demand expected in 2026. While awaiting that potential cyclical improvement, the company is prioritizing internal actions: a cost-reduction program aimed at EUR2.1 billion of savings by 2026 and active management of its major chemical production hubs, including its recently opened site in Zhanjiang, China. The firm also has a planned partial initial public offering of its Agricultural Solutions division slated for 2028.
Kepler’s positive stance comes alongside other market views: Deutsche Bank has downgraded BASF from Buy to Hold and lowered its own target to EUR45, citing a tougher industry backdrop. Separately, BASF reported an incident at its Ludwigshafen plant in which two employees were injured.
Bayer - Buy, 12-month target EUR53
Bayer’s investment case in Kepler Cheuvreux’s review remains supported by a view that the company can navigate its legacy litigation while capitalizing on its research pipeline. Litigation stemming from Bayer’s 2018 acquisition of Monsanto and its glyphosate business has weighed heavily on sentiment, but Kepler flags a potentially material development: the U.S. Supreme Court’s decision to take up the Durnell glyphosate case, which the broker believes raises the odds that Bayer can contain the litigation overhang.
Kepler also notes that PCB-related litigation remains active but that the universe of outstanding cases is limited. The broker expects glyphosate-related legal risks to abate over the course of 2026.
Beyond legal considerations, Bayer’s Crop Sciences unit is highlighted for its long-term sales potential, with Kepler citing a projected peak sales opportunity of EUR32 billion by the late 2030s. On the pharmaceutical side, the firm’s upcoming and recent launches are seen as supportive to future revenue: Kerendia for chronic kidney disease, Nubeqa for prostate cancer, and a renewed development program for asundexian aimed at stroke prevention. Kepler suggests these product drivers could help moderate the impact from patent expiries on blockbusters such as Eylea and Xarelto.
Kepler’s SOP and DCF valuations point to a target price of EUR53 for Bayer. The broker also reports specific clinical and regulatory updates: Bayer announced that asundexian reduced the risk of secondary strokes by 26% in a late-stage trial, and that sevabertinib received Breakthrough Therapy Designation from regulators in the U.S. and China for treatment of a specified lung cancer indication.
Implications and context
Kepler Cheuvreux’s recommendations place emphasis on valuation gaps, cost discipline, and portfolio catalysts as determinants of stock appeal within a sector undergoing demand volatility and heightened regulatory scrutiny. For industrials and capital-intensive chemical producers, the analysis underscores the importance of operational execution - cost savings and site management - while for diversified life sciences and crop-science players, litigation resolution and product launches are central to investment cases.
What investors should watch next
- Progress against BASF’s EUR2.1 billion cost-savings target and any operational developments at its major sites, including Zhanjiang.
- Updates on Bayer’s litigation trajectory, particularly outcomes related to the Durnell case and the anticipated timeline for reductions in glyphosate-related exposure through 2026.
- Commercial performance and regulatory progress of Bayer’s drug launches and further pipeline readouts that could affect long-term sales projections.