LONDON (ShareCast) - (Sharecast News) - Analysts at Berenberg raised their target price on chemicals group Synthomer from 430.0p to 515.0p on Monday, stating continued upgrades from nitrile latex provided "an auspicious backdrop" for 2021.
Berenberg, which reiterated its 'buy' rating on the stock, said cash margins in nitrile were "monstrous", and were also likely to remain so for at least the next two years.

The German bank pointed out that Synthomer's recent trading update increased full-year 2020 underlying earnings guidance by 10% to roughly £255.0m, with the main driver being higher margins for nitrile latex used in making rubber gloves, with prices more than doubling since January 2020.

"We believe EBIT per tonne will have doubled since 2018 to circa £345 in 2021, and consensus has not yet caught up," stated Berenberg, which presented a supply-demand model suggesting nitrile latex industry utilisation in the fourth quarter of 2020 may have exceeded 100% and added it does not believe there will be enough new supply to force margins to revert until 2023/24 at the earliest.

"By this stage, we believe Synthomer's leverage will be minimal and investor focus will have returned to large acquisitions following 2020's successful takeover of US group Omnova."

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