DSM-Firmenich: Premature rally: place on -ve CW as downgrade risk persists; valuation looks stretched

Research evidence excerpt

DSM-Firmenich: Premature rally: place on -ve CW as downgrade risk persists; valuation looks stretched

while end markets remain European Industrials

choppy—and 2H earnings (via margins), we place the shares on Negative CW ahead (44-20) 7742-8733

of the 1H results on 30 Jul. sam.edmunds@jpmorgan.com

Key Changes (FYE Dec)

• FY26/FY27 ests still look high to us: FY26 consensus implies FY adj. Prev Cur Δ

EBITDA margin above 1Q26, yet in each of the past four years the FY margin Adj. EPS - 26E (€) 3.33 3.34 0.2%

has been below the 1Q margin (Table 3QuarterlyandanualEBITDAmargin). We also note that 1Q26 benefited from Adj. EBIT - 26E (€ mn) 772 779 1.0%

customer pre-buying in Perfumery & Beauty (P&B), a higher-margin segment, Adj. EBITDA - 26E (€ mn) 1,718 1,726 0.4%

which likely flattered the quarterly margin. Put differently, applying the last

Style Exposure

four years’ seasonality—where 1Q adj. EBITDA represented ~25–26% of FY

adj. EBITDA (ex. Animal Nutrition) - implies FY26 adj. EBITDA of ~€1.7bn

(even before adjusting for the 1Q pre-buy benefit), ~4% below consensus. As

1H26 has likely been supported by pre-buying, we expect any shortfall to

emerge in 2H26, which in turn could drive larger downgrades to FY27. While

bulls point to efficiency savings underpinning 2H26 margins, the company has

delivered cost savings/synergies over the past three years and FY margins have

still ended below 1Q margins in each of the past four years.

• 2Q likely close to cons, supported by some continued pre-buying: Our

2Q26 OSG estimate is unchanged at +4.3% YoY (volumes +3.4%, price/mix Catalyst Watch is our near-term conviction indicator for our

+0.8%), broadly in line with consensus (+4.5%). We lift our reported group equity coverage universe. It is an indicator our research