AkzoNobel Continues to Push Through Price Increases; Shares Undervalued

Narrow-moat AkzoNobel reported first-quarter EBIT of EUR 230 million, down 25% over 2021 but ahead of the Vara consensus. However, it was a low quality beat, in our opinion, as the positive surprise was generated in the other segment. The core paints and coatings segments were more or less in-line. Regardless, the market is enthused with the results, sending the shares up 6.5% on the day. We think this is due to continued price increases, an impressive 17% increase in the quarter, which more than offset raw material inflation. We don’t expect to make a material change to our EUR 107 fair value estimate. At current levels, the shares look undervalued.