Growth + Cash = King Amid Upstream Reversal Risk

Research evidence excerpt

Growth + Cash = King Amid Upstream Reversal Risk

Foundation

July 20, 2026 03:31 AM GMT

Morgan Stanley & Co. International plc+MChemicals | Europe Lisa H De Neve

Equity Analyst

Growth + Cash = King Amid Lisa.De.Neve@morganstanley.comSelina Wang +44 20 7677-0250

Research Associate

Selina.Wang1@morganstanley.com +44 20 7425-2552

Upstream Reversal Risk

Chemicals

Europe

With upstream momentum showing signs of reversal, we argue Industry View In-Line

quality growth and cash generation will become increasingly What’s Changed

important drivers of relative performance. Air Liquide (AIRP.PA) From To

Rating Equal-weight Overweight

Price Target €152.73 €206.00

Key Takeaways

Novonesis (NSISb.CO) From To

Several Diversified Chems face 2H spread reversal risk or industry/demand Price Target DKr 552.00 DKr 520.00

challenges. We buy the names with the best FCF/cash return prospects (BASF/ Top Pick BASFn.DE NSISb.CO

EVK)... Solvay (SOLB.BR) From To

Price Target €21.00 €23.00

...whereas we avoid those with poor FCF yields (and where FCF < Dividend), being

Evonik Industries AG

SOLB, or where we see near-term earnings risk (CLN). (EVKn.DE) From To

Price Target €19.00 €21.00

Upgrade Air Liquide to OW on underappreciated Electronics potential, supported

by record projects wins and an Electronics backlog ~7x the size of closest peers. Syensqo SA (SYENS.BR) From To

Price Target €50.00 €73.00

Maintain our Novonesis OW, as it screens attractively against our quality-

Arkema S.A. (AKE.PA) From To

compounder peer set. Rating Overweight Equal-weight

Other rating changes: Arkema to EW (from OW) and Clariant to UW (from EW). Price Target €83.00 €63.00

BASF (BASFn.DE) From To

European Chemicals benefitted from an upstream cycle upswing in 1H26 Price Target €60.00 €56.00