JPM | FTM | Today’s Research | Europe

Research evidence excerpt

JPM | FTM | Today’s Research | Europe

Europe Equity Research

Due to market closures, there will be no publication of Europe First to Market on 25 May. Publication

resumes on 26 May.

Europe First to Market 22 May 2026

Today’s Morning Meeting | Also Published Today | Key Changes | JPM Events | Upcoming Earnings

Today’s Morning Meeting

CW | | AFL | | European Chemicals (Chetan Udeshi, CFA/Angelina Glazova, CFA)

Sector blues set to return. Place BASF (UW) on -ve CW; d/g Evonik, Arkema and IMCD to UW; u/g

Clariant to OW

While the duration of the Middle East (ME) conflict remains difficult to call, recent datapoints suggest that any associated near-

term tailwinds for cyclical chemical stocks may be lower than expected, and may already be fading, as discussed below.

Hence, we expect investors to look through potential 2Q earnings strength/beats as a weaker 2H26 and 2027 earnings outlook

brings structural challenges back into focus: significant industry overcapacity (notably in China) and intensifying competition in

specialty products from China and other Asian producers. We note that most cyclical chemical stocks are up 15-40% YTD

despite the challenging structural outlook. We place BASF on -ve CW into 2Q results on 29 Jul, as our forecasts indicate

downside risk to consensus in 2H. In our view, BASF’s valuation also remains disconnected from challenged fundamentals

(FY26/27E EV/EBITDA 8.0x/8.5x vs. the historical long-term median of ~8x , FY26/27E P/E 18x/21x vs. the historical

median of ~12x, and FY26/27E FCF yield 1%/3% ) with FY26/27E post-tax ROIC of ~4–5% , even before accounting for

ongoing material restructuring costs and potential impairments. We downgrade Evonik, Arkema and IMCD to UW from N,

and downgrade Lanxess to N from OW.