Analyst Boosts Chemours Stock To Outperform, Ups Price Target By Over 40% – Chemours (NYSE:CC)

Chemours Co (CC) received an upgrade from RBC Capital analyst Arun Viswanathan, who raised the stock’s rating from Sector Perform to Outperform. Viswanathan also increased the price target for CC to $40 from $28, indicating a potential upside of 40.6%.

The upgrade and price rise were driven by increased optimism on titanium dioxide (TiO2) margin recovery, strong performance in the thermal and special solutions (TSS) segment, and the settlement of per- and polyfluoroalkyl substances (PFAS) liabilities.

Viswanathan expects TiO2 volumes to rise in 2024, supported by favorable comparisons and potential tariffs on Chinese imports into Europe. The TSS segment is thriving, mainly due to the growing adoption of OPTEON ahead of the 2024 hydrofluorocarbon (HFC) step-down. Chemours Co anticipates that OPTEON and immersion cooling will drive TSS towards an EBITDA of over $800 million by 2026, with mid-high 30% EBITDA margins and mid-to-high single-digit sales growth.

However, the performance of the advanced performance materials (APM) segment has slowed down post-COVID due to destocking. Viswanathan expects APM to have a 2024 EBITDA of $290 million, down from the 2022 peak of $368 million. Chemours Co’s shift of focus within APM from automotive to plastics is expected to boost sales growth and help margins recover to a low to mid-20% range.

Viswanathan’s $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. Despite short-term challenges such as elevated raw material costs and sluggish demand in Europe and Asia, the analyst is confident in the anticipated recovery of TiO2 margins in 2024.

One significant factor contributing to the upgrade is Chemours Co’s prompt and efficient resolution of longstanding liabilities, which considerably diminishes the associated risk with the stock. This resolution could potentially trigger a multiple expansion ranging from 1 to 3 times.

As of the last check on Friday, CC shares were trading higher by 8.49% at $29.77.

Overall, the upgrade and raised price target for Chemours Co reflect the analyst’s positive outlook on the company’s prospects, driven by margin recovery, strong segment performance, and the resolution of liabilities. Investors will be watching closely to see if Chemours Co can deliver on these expectations and continue its upward trajectory.