TSX:CHE.DB.E - Post by User
Post by
GregC24on May 11, 2023 12:45pm
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Post# 35443477
Scotia's Comment
Scotia's CommentLatest Research (May 10, 2023):OUR TAKE: Positive. We expect CHE to outperform near-term, following a substantial 30% Q1 EBITDA beat ($132M vs. $102M), and a meaningful bump to the ‘23 guide, which accounts for more than just the Q1 results. The beat was due to: (1) an unprecedented recovery in sodium chlorate ASPs; (2) improved water solutions margins; and (3) continued strength in chlor-alkali fundamentals.
Key points: ‘23 guide raised to >$430M from $360M to $400M, and compared to the Street/Scotia at $390M/$387M. If add Q1 actuals to the Street’s estimates, the Street is still coming up short at $418M. Therefore, watch for Q2-Q4 estimates to rise too.
EC beat by 28% ($100M vs. $64M), reflecting continued support from chlor-alkali margin. Robust fundamentals continue on the back of EU-based supply tightness (electricity is the main feedstock for chloralkali). MECU netbacks improved by $550/mt y/y – 60% from chlorine and HCl, 20% from FX, and the remainder from caustic soda.
SWC missed by 6% ($55M vs. $59M), as lower sulphur prices and lower Regen volume more than offset higher pricing. Regen acid demand was low due to a planned turnaround at a major customer.
Leverage unchanged at 2.2x; LTM payout ratio of 28%.