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CHE.UN is a buy, Desjardins says

Its third quarter results are in the books and Desjardins analyst Gary Ho still thinks there is double-digit upside to Chemtrade Logistics Income Fund (Chemtrade Logistics Income Fund Stock Quote, Chart, News, Analysts, Financials TSX:CHE.UN).

On November 14, CHE.UN reported its Q3, 2023 results. The company posted Adjusted EBITDA of $142.1-million on revenue of $483.5-million, a topline that was down seven per cent over the same period a year prior.

“The strong performance that we delivered in the third quarter, both financially and operationally, further builds on the solid track-record that we have established in recent years and positions us for a record year in 2023,” CEO Scott Rook said. “While these results reflect strength across a number of products in our diversified portfolio, they are really a testament to the ongoing focus and execution of the entire Chemtrade team. Despite a decline in revenue attributable to lower sulphur and caustic soda prices, the commercial initiatives along with a focus on operating performance were pivotal in driving yet another quarter of growth in Adjusted EBITDA and distributable cash.”

The analyst gave his takeaway on the development.

“CHE delivered a strong 3Q beat, accompanied by a 3.2% EBITDA guidance raise to C $490m+. While 4Q will see some seasonal softness from several chemicals and lower caustic soda pricing, we believe there could be some upside to management’s C $72m+ implied guidance. 2024 will face tough comps in 1H and the North Vancouver turnaround (~C$20m impact), as well as a ~C$6m EBITDA loss from the P2S5 sale,” he wrote.

In a research update to clients November 15,  Ho maintained his “Buy” rating and twelve-month price target of $12.00 on CHE.UN, implying a return of 43 per cent at the time of publication.

“Our positive view is based on: (1) multiple chemicals in CHE’s portfolio having relatively recession-resistant attributes; (2) tremendous ultra-pure and hydrogen opportunities; and (3) consistent execution and a repaired balance sheet should restore investor confidence and warrant a valuation re-rate,” the analyst concluded.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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