In a report released on January 31, Leonardo Marcondes from Bank of America Securities maintained a Hold rating on Braskem SA (BAK – Research Report), with a price target of $5.40.
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Leonardo Marcondes has given his Hold rating due to a combination of factors impacting Braskem SA. The company recently announced an additional provision of approximately R$1.3 billion related to the Alagoas geological event, which is expected to negatively affect its long-term free cash flow. This event, involving the backfilling of salt cavities, has been a significant risk in Braskem’s investment thesis, and there could be further provisions required as discussions with the Alagoas state continue.
While the net present value impact of the provision is expected to be lower due to the extended timeline of disbursement, the uncertainty surrounding further financial obligations remains. Additionally, the challenging outlook for petrochemical spreads, driven by weak demand and increased capacity in China, suggests that Braskem’s EBITDA will likely remain below its mid-cycle level over the next few years. Consequently, these factors support a cautious approach, justifying the Hold rating.
BAK’s price has also changed moderately for the past six months – from $6.220 to $4.640, which is a -25.40% drop .