In addition, growth in the nutrition and care, and chemicals segments has been strong. While growth in the former was led by higher demand for cleaning products, robust demand for intermediates and a low base helped the latter. While most companies
benefitted from the higher demand for pharma, agrochemicals, and home and personal products in the June quarter, the discretionary segment (paints, plastics, polymers, auto, and adhesives, among others) was impacted by Covid-19.
BASF’s exposure to discretionary demand (about half its sales) through its materials, industrial solutions, and surface technologies segments may keep overall growth under pressure. Analysts at Emkay Research expect moderate growth for the company and highlight that margin volatility in segments, such as materials and surface technologies, will be a key monitorable. Company margins have been the range of 1-5 per cent over the past five quarters.
The company is looking at improving its return on capital employed from just under 6 per cent to 10 per cent in the next two to three years, led by cost efficiencies and improving product portfolio.
Given the 55 per cent price uptick in the stock over the past three months, there is little upside from these levels. Investors must await steady revenue growth and margin performance (they have ranged from 1-5 per cent in the past five quarters) before considering the stock.