TSX:CHE.DB.E - Post by User
Post by
incomedreamer11on Nov 15, 2023 8:35am
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Post# 35736349
Scotia comments
Scotia comments
Textbook Q3 Beat/Raise; But Street Still Calling for a Q4 Miss; '24 Could Be Softer Than '23
OUR TAKE: Mixed. CHE posted a well-rounded Q3 beat ($142M vs. $111M), and increased its ‘23 guide to >$490M. This implies >$72M for Q4 vs. the Street already at $90M (we recently noted how a pull forward of EBITDA could disappoint at the end of the year). The tone of the call could be a little downbeat, with ‘24 EBITDA unlikely to beat or match ‘23, while CHE’s core verticals (caustic soda and merchant acid) soften.
- EC EBITDA beat by 33% ($84M vs. $63M), with higher selling prices for chlorate, chlorine, and HCl continuing to offset lower caustic prices, as well as reduced sodium chlorate volume. MECU netbacks are now expected to be $90/MECU higher y/y vs. CHE’s previous assumption of $60 lower.
- SWC EBITDA beat by 16% ($84M vs. $72M), with regen acid strength (price + volume) and higher selling prices of water solutions products more than offsetting weakness in merchant acid (price + volume). Given lower raws for water solutions, it’s possible we see margins weaken in ‘24 vs. Q3.
- LTM payout of 22%. If sub-40% is sustainable, how long will it be until investors push for a distribution increase? Recall, the distribution was halved when COVID started – March ‘20.
- Leverage improved to 1.7x, from 1.8x q/q.
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