Credit Suisse says buy CE on dip

According to Credit Suisse analyst:

the 11% sell-off in CE is a wild overreaction tied to the lack of a "beat and raise" from CE (we only got the beat) and has resulted in a compelling opportunity to get in this high quality name at a discount. Based on our newly revised estimates (see full report), CE currently trades at 9.9X 2008 EPS and 9.3X our 2009 EPS-both the lowest in our coverage universe, as well as 6.5X 2008 EBITDA and 6.3X 2009 EBITDA-second lowest only to FOE in our coverage universe. Given that CE should put up double digit EPS growth for the next few years and has some of the highest returns in the group, this doesn't make sense and we reiterate our outperform rating.
• With regard to earnings, following July 22nd 2Q conference call, we are updating our model to reflect the $0.11 beat in 2Q vs. our estimate as well as the business trends discussed on the call. We are conservatively reducing our 2008 estimate from $4.09 to $4.00 to reflect the difficult economic and raw material environment highlighted by management. We appreciate management's more conservative stance but have a very tough time seeing how CE will not reach/exceed our newly revised estimate (despite their conservative guidance of $3.60-3.85). Some of the trends/assumptions our new estimate reflects include:
• Slightly slower growth in Advanced Engineered Materials and its equity affiliates - the company indicated that the strong 8% volume growth in AEM seen this quarter may have been tied to pre-buying by customers ahead of announced price increases, and as a result, may negatively impact volumes in 3Q. We have therefore lowered our top-line and equity earnings assumptions for this segment in the second half.
• Pricing declines and lower margins in Acetyl Intermediates - we have slightly reduced our pricing and margin assumptions for this business, as pricing in 2Q benefited from planned and unplanned outages by competitors and with a previously mothballed plant coming bank on line in China, CE expects pricing to trend back toward more normal levels moving forward given the continued demand in the region, this may be overly conservative but given the lack of clarity we believe it is reasonable to be conservative.
• Lower margins in Industrial and Consumer Specialties - owing to higher raw material and energy costs, we have lowered our margin assumptions for these two businesses.
• For 2009, we are maintaining our EPS estimate at $4.28 which reflects slightly more modest margin assumptions offset by a lower share count. Finally, for 2010, we are raising our estimate from $4.47 to $4.61 as CE should benefit from a lower share count and a slightly higher revenue base that should see incremental leverage when the margins in some of their businesses start to return.

塞拉尼斯公司发布创纪录二季度财报
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