Analyst Boosts This Manufacturer Stock To Outperform, Ups Price Target By Over 40%

RBC Capital analyst Arun Viswanathan upgraded Chemours Co CC from Sector Perform to Outperform.

Viswanathan also raised the price target to $40 from $28 — an upside of 40.6%. Increased optimism on TiO2 margin recovery, strong TSS performance, and PFAS liabilities settlement drive the upgrade and price rise.

Viswanathan expects TT volumes to rise in 2024 with favorable comps and potential tariffs on Chinese imports into Europe.

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The analyst points out that the TSS segment is thriving, largely thanks to rising OPTEON adoption ahead of the 2024 HFC step-down. CC anticipates that OPTEON and immersion cooling will drive TSS towards an EBITDA of over $800 million by 2026, supported by mid-high 30% EBITDA margins and mid-to-high single-digit sales growth.

APM's performance has slowed down post-COVID due to destocking. Viswanathan sees APM at its lowest with a 2024 EBITDA of $290M, down from the 2022 peak of $368 million. CC's shift of focus within APM from AM to PS is expected to boost sales growth and help margins recover to a low to mid-20% range.

Viswanathan states that the $40 target price is based on 1.9x leverage and a 7x EBITDA multiple (from 5.5x) on TiO2 recovery, TSS growth, and PFAS settlement.

Viswanathan notes that elevated raw material costs and sluggish demand in Europe/Asia continue to pose short-term challenges. Despite this, he expresses confidence in the anticipated recovery of TiO2 margins in 2024.

The analyst sees CC's prompt and efficient resolution of longstanding liabilities considerably diminishes the associated risk with CC stock, potentially triggering a multiple expansion ranging from 1 to 3 times.

Price Action: CC shares are trading higher by 8.49% at $29.77 on the last check Friday.

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