Another Profit Warning for AkzoNobel; Shares Still Materially Undervalued

Narrow-moat AkzoNobel announced third-quarter EBIT is expected to be EUR 195 million-EUR 215 million, implying a 15% drop over 2022 using the midpoint and a significant miss versus current Vara consensus of EUR 290 million. Despite the big consensus miss, shares are only down 1% intraday, which we think clearly indicates that true market consensus is much more bearish than current sell-side consensus. We have been consistently bearish versus sell-side consensus and management guidance. Nevertheless, 2022 is now looking worse than our previous conservative expectations. We have taken down our near-term estimates modestly, which only reduces our fair value estimate to EUR 100 from EUR 102. We continue to view the shares as materially undervalued.