Inbox: Lenzing: “In the short term, the outlook is weak,” my analysts say




Mailed from / found at: Erste Group Research

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From Erste Group’s Equity Weekly: In our new Company Report, we confirm our hold recommendation for the Lenzing share, but lower our target price to EUR 46.40. This is due to our lower forecasts due to the weak global fiber market due to the COVID-19 crisis.

Outlook. The weak world fiber market already left its mark on Lenzing in the first quarter. The textile and clothing industry is badly affected by the COVID-19 crisis, which is reflected in the weak demand on the world fiber market and increased price pressure (but above all not only in the standard viscose market). The surge in demand for fibers for medicine and hygiene needs can only partially fill this gap. In the long term, we see Lenzing’s competitive strengths in the specialty fibers sector, which will be strengthened by the planned investment projects (Lyocell plant in Thailand, pulp mill in Brazil), intact. In the short term, however, the outlook is weak and uncertain. We have therefore significantly reduced our estimates for 2020 and 2021 and are expecting a decline in sales of around 16% to EUR 1.78 billion this year as well as a net result just below the zero line. The duration of the corona crisis is currently difficult to estimate and will largely depend on the availability of a vaccine. Nevertheless, we are moderately optimistic and expect the net result to improve and return to the black in 2021.

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