Jefferies shifted its recommendations on two major German chemicals groups in a note dated Wednesday, elevating Evonik Industries to a buy rating from hold with a price target of €20 per share while lowering Lanxess to underperform from hold and setting a €16 target. The bank said the market reaction to a supply-led pricing spike tied to the Iran conflict has created a valuation disconnect that favors Evonik's more defensive earnings base relative to Lanxess's more stretched re-rating.
Jefferies pointed to moves in upstream spreads at BASF as evidence of the short-term, supply-driven nature of recent pricing. BASF upstream spreads climbed 57% from pre-war levels to a recent peak before easing by 19%. The bank attributed that pattern to supply disruption, Chinese volume redirection and customer pre-buying rather than to a structural improvement in demand.
On Evonik, Jefferies noted the stock has gained 19% since the conflict began. Consensus upgrades for Evonik's FY26 EBITDA are around 12%, a tighter alignment with the stock's move than peers. Jefferies increased its own FY26 EBITDA estimate for Evonik by 16% to €2.17 billion, a figure that sits about 3% above consensus at €2.10 billion.
The note highlighted particularly strong pricing in methionine markets, where spreads were around 95% above their medium-term average. Jefferies argued that Evonik, as one of the few integrated producers with relatively secure supply, should be better positioned to press for favorable pricing, supporting its negotiating leverage with customers.
Jefferies also emphasized Evonik's exposure to defensive end-markets. Approximately 40% of Evonik's revenues are tied to food, nutrition and consumer staples end-markets, the highest share among the diversified chemicals peers covered by the bank. That revenue mix underpinned the bank's tilt toward a buy rating.
By contrast, Lanxess has seen a sharp rebound in its share price since a March trough, rising about 53% following the sell-off related to Envalior. Consensus FY26 EBITDA forecasts for Lanxess increased by only 9% over the same period. Jefferies set its FY26 EBITDA estimate for Lanxess at €477 million, which is approximately 5% below the company's guidance midpoint.
The bank expects Lanxess's net debt to EBITDA to remain around 4.1 times, excluding pensions, through 2026. Jefferies also extended the base-case timing for an Envalior cash injection to 2028 and derived an equity value for that stake of €327 million, equivalent to roughly €3.80 per share.
Looking beyond individual names, Jefferies flagged a sector-level skew in consensus expectations. The analysts said consensus implies that second-half 2026 will contribute 48.5% of full-year earnings versus a five-year historical average of 46.4%. Jefferies described that second-half skew as demanding, given the likelihood that first-half volumes were inflated by pre-buying.
The note also cited several macro and industry indicators that could temper demand. German industrial production declined 2.8% year-on-year in March 2026. Construction PMIs fell 8% month-on-month in April and were down 11% year-on-year. European light vehicle production was forecast to drop 2.4% in 2026.
Energy cost assumptions formed part of Jefferies' sector view. The bank projected European gas prices at $17.10 per million British thermal units (MMBtu) for 2026 and $14 per MMBtu for 2027, which it noted would remain roughly 2.5 times U.S. levels under a mid-term U.S. assumption of $10 per MMBtu.
Jefferies' repositioning reflects a combination of company-specific earnings resilience, market pricing dislocations tied to the Iran-driven supply shock, and broader demand and cost considerations across the European chemicals sector.