BASF's Q2 in Line With Prerelease; Material Slowdown Expected in Second Half

Narrow-moat BASF reported second-quarter EBIT of EUR 2.3 billion, flat over the prior year and in line with prereleased figures released on July 12. With continued strong results, BASF lifted the bottom end of its 2022 EBIT guidance range, now expecting EUR 6.8 billion-EUR 7.2 billion versus EUR 6.6 billion-EUR 7.2 billion previously. Using the midpoint of the new range, BASF has already achieved roughly 75% of it’s expected EBIT for the full year in the first half. Hence, a material slowdown is expected in the second half. We have lifted our 2022 estimates, but this was offset by reductions beyond 2022 given the increasingly gloomy outlook for the global economy, particularly Europe. Consequently, we have trimmed our fair value estimate to EUR 62 ($16) from EUR 66 ($17.50). Despite the modest cut to fair value, shares continue to look significantly undervalued.