- KeyBanc analyst Aleksey Yefremov initiated coverage of PPG Industries, Inc (NYSE:PPG) with an Overweight rating and a $127 price target.
- The central premise of Yefremov thesis is that a sharp decline in costs is likely coming in 1H23, helping to offset cyclical volume pressure.
- Spot prices of critical raw materials have already declined 20%-plus since Q2, and he expected PPG to see the benefits with a two-quarter lag.
- The analyst sees an opportunity for price and cost normalization over the next three to four quarters and believes the improvement will be a strong enough benefit to outweigh the 6%-8% volume declines that PPG could see in 2023.
- Yefremov expected that auto OEM, aerospace, and refinish have not fully recovered to 2019 levels will mitigate volume pressure.
- Indeed, PPG’s volumes are still 10% off the 2019 baseline.
- Given the slowing macro environment, Yefremov was also cautious about architectural and industrial coatings volumes.
- The analyst expected significant challenges from EMEA.
- Yefremov viewed the current EV/EBITDA multiple as moderately attractive, given the potential for future recovery in volumes and margins. He estimated PPG trades at normalized EV/EBITDA.
- Price Action: PPG shares traded higher by 2.70% at $113.31 on the last check Monday.
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