The chemical industry is set for robust long-term growth due to rising demand for specialty chemicals, advanced production of bio-based chemicals amid sustainability initiatives, and the adoption of digital technologies. Thus, it could be wise to watch chemical stocks Toray Industries, Inc. (TRYIY), BASF SE (BASFY), and Fuchs SE (FUPBY) under $15.
The chemical sector foresees a significant transformation this year, emphasizing sustainable methods, transitioning toward renewable and bio-based sources, the emergence of digital technologies such as artificial intelligence (AI), machine learning (ML), and the Internet of Things (IoT), tailored solutions, and a move toward localized production and supply chains.
On top of it, the rising demand for inorganic chemicals in the fertilizer industry is also expected to propel the industry’s growth. Therefore, the global chemicals market is expected to grow at a CAGR of 8.7% to reach $7.79 trillion by 2028. Meanwhile, the specialty chemicals market is expected to reach $937.28 billion, expanding at a CAGR of 4.9%.
Moreover, AI is being widely adopted by the chemical industry to improve processes and discoveries. AI is helping chemists in various ways, from basic research to production. In research, AI techniques like machine learning and deep learning augment human insights, speeding up drug discovery and material development.
Hence, AI in the chemical market is expected to reach $12.51 billion by 2031, growing at a CAGR of 36.7%.
Considering these encouraging trends, let’s take a look at the fundamentals of the three Chemicals industry stocks, beginning with the third choice.
Stock #3: Toray Industries, Inc. (TRYIY)
Headquartered in Tokyo, Japan, TRYIY manufactures, processes, and sells fibers and textiles, performance chemicals, carbon fiber composite materials, environment and engineering products, and life science products in Japan, China, North America, Europe, and internationally.
In terms of forward EV/EBITDA, TRYIY is trading at 7.83x, 10.3% lower than the industry average of 8.72x. Its forward Price/Sales multiple of 0.49 is 64.6% lower than the industry average of 1.38. However, the stock’s forward EV/EBIT of 16.91x is 24.2% higher than the industry average of 13.61x.
For the fiscal year that ended March 31, 2024, TRYIY’s revenue declined 1.2% year-over-year to ¥2.46 trillion ($15.69 billion), but its core operating was ¥102.62 billion ($654.31 million), up 6.9% from the previous year. The company’s profit decreased 62.3% from the prior year to ¥30.46 billion ($194.21 million). Its EPS declined 70% year-over-year to ¥13.65.
The company’s total assets came in at ¥3.47 trillion ($22.12 billion) for the period that ended March 31, 2024, compared to ¥3.19 trillion ($20.34 billion) for the period that ended March 31, 2023.
Analysts expect TRYIY’s revenue for the fiscal year (ending March 2025) to increase 324.6% year-over-year to $16.50 billion. However, the company has failed to surpass the consensus revenue estimates in each of the trailing four quarters.
Over the past three months, TRYIY’s stock has gained 6.2% but plunged 10.3% over the past year to close the last trading session at $9.77.
TRYIY’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a C grade for Quality, Growth, and Momentum. TRYIY is ranked #40 among 81 stocks in the B-rated Chemicals industry.
Click here to access additional TRYIY’s ratings (Value, Sentiment, and Stability).
Stock #2: BASF SE (BASFY)
Headquartered in Ludwigshafen am Rhein, Germany, BASF operates as a global chemical company. It operates through six segments: Chemicals; Materials; Industrial Solutions; Surface Technologies; Nutrition & Care; and Agricultural Solutions.
On April 22, 2024, BASFY and Vattenfall signed an agreement for BASFY to acquire a 49% stake in the Nordlicht offshore wind farms in the German North Sea, with a combined capacity of 1.6 gigawatts. The project will provide renewable energy for BASFY’s production sites and Vattenfall’s customers in Germany.
On February 9, BASFY announced that it would divest its shares in two joint ventures in Korla, China, due to competitive pressures and high carbon footprints associated with the production processes. This move aligns with BASF’s strategy to offer more sustainable products and address concerns related to its joint venture partner.
In terms of forward non-GAAP P/E, BASFY’s 13.22x is 20.3% lower than the 16.59x industry average. Its 0.95x forward EV/Sales is 45.5% lower than the 1.75x industry average. Likewise, its 7.89x forward EV/EBITDA is 9.6% lower than the 8.72x industry average.
BASFY’s sales for the first quarter ended March 31, 2024, were €17.55 billion ($19 billion). The company reported an EBITDA of €2.66 billion ($2.88 billion). Net income from shareholdings rose 25.6% to €229 million ($247.93 million). Additionally, its adjusted earnings per share was €1.68 for the quarter.
Analysts expect BASFY’s revenue for the quarter ending September 30, 2024, to increase 9.9% year-over-year to $18.30 billion. Its EPS for the fiscal year 2024 is expected to grow 33.3% year-over-year to $1.
Shares of BASFY have surged 9.2% over the past six months to close the last trading session at $13.
BASFY’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
BASFY has a B grade for Value and Stability. It is ranked #9 in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have BASFY ratings for Growth, Momentum, Sentiment, and Quality. Get all BASFY ratings here.
Stock #1: Fuchs SE (FUPBY)
Headquartered in Mannheim, Germany, FUPBY develops, produces, and sells lubricants and related specialties in Europe, the Middle East, Africa, the Asia Pacific, and North and South America.
On April 22, 2924, FUPBY acquired the international LUBCON Group primarily to jointly innovate and advance high-quality specialty lubrication solutions. The family-run German company has expertise in the development, manufacture, sale, and distribution of greases, oils, and pastes.
This acquisition will help FUBPY strengthen its product portfolio for specialty lubrication solutions and its global competitiveness.
In terms of forward EV/Sales, FUPBY’s 1.44x is 17.3% lower than the 1.75x industry average. Likewise, the stock’s 11.80x forward EV/EBIT is 13.3% lower than the 13.61x industry average.
During the first quarter, which ended March 31, 2024, FUPBY reported sales revenues of €877 million ($949.51 million). Its gross profit increased 2.4% from the previous-year quarter to €296 million ($320.47 million). The company’s earnings after tax and EPS were €77 million ($83.37 million) and €0.58, up 45.4% and 7.4% year-over-year, respectively.
Street expects FUPBY’s revenue to increase marginally year-over-year to $3.89 billion for the fiscal year ending December 2024. Its EPS is expected to grow 11.9% year-over-year to $0.64 for the current year.
FUPBY’s stock has gained 28.6% over the past year to close the last trading session at $12.23.
FUPBY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Quality. Within the same industry, FUPBY is ranked #8.
Click here to access additional ratings of FYPBY for Growth, Value, Momentum, and Sentiment.
What To Do Next?
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BASFY shares were trading at $13.01 per share on Friday morning, up $0.01 (+0.10%). Year-to-date, BASFY has gained 1.76%, versus a 11.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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