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Itaú downgrades Braskem target on higher oil prices (BAK)

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Itaú BBA issued a new report downgrading Brazilian petrochemical manufacturer Braskem ( BAK , quote ) as rising input costs cut into its profitability while global demand for plastic feed stocks declines. However, they stil rate the company at "market perform."

Supporting this decision are expected higher oil prices in the short term affecting the company's earnings.

According to the analysts, their estimate on BAK's EBITDA dropped 8.3% and 3.9% to BRL 4.343 million (USD $2.335 million) and BRL 4.860 million ($2.613 million) for 2012 and 2013, respectively.

"We foresee limited room for a significant drop in oil prices no matter how deep the global crisis goes, given the political unrest in the Middle East, while petrochemical prices continue to be affected by weaker demand," explain the research team for the sector.

Also driving Itaú BBA's new price are a one-year delay to the expected start of the economic cycle cycle, Brazil's macroeconomic forecasts and BAK's somewhat disappointing 3Q11 results.

Analysts expect domestic demand growth for petrochemical products to slow down in 2012 given the lower GDP forecasts many key markets are already making.

On the other hand, with better local perspectives for the second half of the year, experts at Itaú BBA point out that by that time BAK may be a good investment option.

Analysts still leave room for an upside to their numbers on BAK as further depreciation of the Brazilian real and the exclusion of the ICMS tax benefit for imports can improve its results.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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