EQS Group-News: Research dynamics / Keyword (s): Research update
05.07.2021 / 17:56
This report is published by Research Dynamics, an independent research boutique
CPH undertakes the expansion of its Chemicals division
CPH’s chemistry division, Zeochem, is preparing to expand the capacity of two of its molecular sieve lines to meet growing demand. The expansion would require an investment of just over CHF 10 million and will help further consolidate Zeochem’s technological leadership position in the market for high quality molecular sieves. The expansion of existing capacities is expected to be completed by mid-2022nd.
Expanding the capacity of lithium molecular sieves to meet the demand for portable oxygen concentrators
The COVID-19-induced acceleration of respiratory illnesses has led to an increase in demand for portable oxygen concentrators. To meet this growing demand, CPH is looking to increase the capacity of lithium molecular sieves at the Zeochem production facility in Louisville, United States. Lithium molecular sieves are used to concentrate medical oxygen and are also required for the production of oxygen for industrial applications. Total plant production will be increased by around 700 tonnes per year by investing in expanding the additional capacity of the existing facility.
Expanding Purmol’s Capacity to Operate New and Existing Growing Applications
Purmol, a molecular sieve powder that finds use in many applications, is next on the expansion list. Prumol is useful in preventing the formation of bubbles in polyurethane flooring. In addition, Purmol is useful in the new rapidly growing area of its application in window technology. Previously, aluminum spacers were supplied with a molecular sieve in multi-pane windows to prevent fogging of the panes, now plastic spacers are gaining in importance. The plastic spacer provides better thermal insulation and the molecular sieve desiccator can be used as a powder in plastic. The company is looking to increase Purmol’s annual capacity by around 800 tonnes by installing a new calciner at its Zvornik site in Bosnia and Herzegovina.
CPH said the investments needed for the two expansion projects are expected to amount to just over CHF 10 million until operations are operational by mid-2022. Assuming an equal split, this adds CHF 5 million for 2H2021E and CHF 5 million for 1H2022E. Our current forecast is for CAPEX of CHF 40 million and CHF 30 million for this year and next year, respectively. Ahead of the 2021E half-year results expected on July 21, we are leaving our forecasts unchanged.
Assessment and conclusion
We assess CPH using DCF and relative assessment techniques. Our intrinsic value of CHF 91.3 per share, which is similar to our previous price target (CHF 91.3), which implies an increase of ~ 33.5% from current levels. For a relative assessment, given that the Group operates in three entirely different divisions, we compare each of CPH’s divisions with different sets of relevant industry peers. We used three parameters – EV / EBITDA, P / S and P / E – to analyze the relative valuation of the Group. CPH is currently trading at a P / S multiple of 0.9x (FY2021E), a significant 36% discount from the division’s peer weighted average multiple.
File: CPHN_Event Update_5.7.2021
End of press release