IMCD Shares Jump After UBS Upgrades Stock to 'Buy'

Shares in IMCD NV (AS:IMCD), a Netherlands-based specialty chemical distributor, jumped more than 5% on Tuesday after analysts at UBS upgraded the company's stock to "Buy" from a previous "Neutral" rating. The bank also raised its price target on the shares to €100 from €85.

Analyst Rationale

In a note to clients, UBS cited a "viable path back to 6-7% organic EPS growth" for IMCD. The analysts believe that rising inflation in oil and chemical prices, along with persistent supply chain stress, will help offset deflationary pressures that have recently impacted the sector.

UBS estimates these factors could provide a 2% boost to growth in the 2026-27 fiscal years. While the bank anticipates only a gradual volume recovery in fiscal 2026, it sees this as sufficient to drive an inflection in top-line growth starting in the second quarter. The price target increase was attributed to 10-15% upgrades to earnings-per-share estimates and a higher discounted-cash-flow terminal margin.

Market Context and Valuation

The upgrade comes after a period of significant underperformance for the stock, which had fallen about 25% over the past 12 months and remained roughly 60% below its 2021 peak. According to UBS, this reflects three years of profit headwinds for the chemical distribution industry following a period of exceptional growth.

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UBS noted that IMCD now trades at a valuation of approximately 11 times its estimated 2027 EV/EBITA. The new price target implies a multiple of about 13 times. The bank also highlighted that the stock currently trades at a roughly 15% discount to its high-quality growth peers, a reversal from its 10-year average premium of about 25%.

Outlook and Risks

Despite recent challenges, UBS pointed to IMCD's strong long-term track record, which includes a compound annual growth rate (CAGR) in EBITA of approximately 15% from 2015 to 2025. The bank sees a path for organic EPS growth to exceed 6% and potentially reach double digits if the company continues its merger and acquisition strategy in fragmented markets.

UBS outlined several key risks to its thesis, including a cyclical slowdown affecting industrial end markets (which constitute about 45% of IMCD's business), regulatory risks, the potential loss of key suppliers, and an inability to pass on fluctuating product costs to customers.