UBS moved its recommendation on Brenntag AG to neutral from sell on Thursday, raising its 12-month price target to €60 from €42. The brokerage pointed to recent spikes in energy and industrial chemical prices as a potential counterweight to persistent margin and profit challenges at the German chemical distributor.
The upgrade ends a sell stance UBS had maintained since October 2025. Analysts at the bank highlighted the changing macro picture after the outbreak of the Middle East conflict, noting crude oil has risen by roughly 60% since the conflict began and that spot prices for certain industrial chemicals are higher by more than 50% year-to-date.
"Price spikes in energy and chemicals presents upside risk to GP/unit forecasts over the next c18mths, which we believe could help neutralise current profit pressures," the UBS analysts wrote, flagging the potential for inflation-linked improvements to gross profit per unit.
On the operational forecasts, UBS now assumes gross profit per unit will increase by about 5% annually over fiscal years 2026 and 2027. That trajectory underpins the bank's view that profits will be broadly flat in FY26 and that adjusted EBITA can rebound by 13.5% year-on-year to reach €1.06 billion in FY27. UBS noted these adjusted EBITA forecasts sit roughly 5% above consensus for both FY27 and FY28.
The brokerage also lifted its adjusted earnings-per-share estimates, to €3.96 for FY26 and €4.60 for FY27, from previous forecasts of €3.77 and €4.20 respectively. Despite the upgrades, UBS remains slightly more cautious than the market on first-quarter FY26 results, forecasting adjusted EBITA of €201 million versus a consensus figure of €210 million. Any inflation-related benefits are expected to start becoming visible from the second quarter, UBS said.
Brenntag has seen adjusted EBITA fall from a FY22 peak of €1.51 billion to €929.3 million in FY25, a decline of about 40% according to company data and UBS estimates. On volumes, the broker projects a 3% year-on-year decrease in FY26, and outlined a downside scenario in which a 4% annual volume decline would support a reduced price target of €30.
The company is pursuing cost reductions as it restructures following the decision not to proceed with a full separation of its Essentials and Specialties divisions. Management is targeting between €200 million and €250 million of savings across FY26 and FY27. UBS added that mid-term adjusted EBITA could reach around €1.4 billion if management succeeds in eliminating what the bank estimates to be approximately €0.4 billion of excess SG&A expenditures.
UBS updated its discounted cash-flow inputs as part of the valuation revision. The bank now uses a weighted average cost of capital of 8.6%, down from 9%, and a terminal conversion margin of 34.5%, up from 32%. Those assumptions translate to a fair value of €54 per share and support the €60 12-month price target.
In a more bullish scenario, UBS calculated a potential share price of €85 predicated on gross profit per unit growth of 6.5% and an adjusted EBITA conversion margin of 29.9% in FY27. The bank also expects net debt to EBITDA to be around 2 times for FY26 under its base-case assumptions.
What this means
- UBS has adjusted its view on Brenntag, reflecting the possibility that recent commodity price inflation could materially improve gross profit per unit over the next 18 months.
- Analysts have raised EPS and EBITA forecasts, but remain below consensus for near-term quarterly profits and highlight volume risk in FY26.
- Execution of cost savings and SG&A reductions are key to the broker's mid-term upside case for adjusted EBITA and valuation.
Company performance and risks
Brenntag's adjusted EBITA has contracted markedly since FY22, and UBS projects further volume pressures in FY26. The firm is pursuing restructuring and cost-savings targets to restore profitability, but the scale and timing of those savings will affect the outlook.
UBS's valuation and alternative scenarios hinge on several inputs that could move materially, including gross profit per unit, conversion margins, and successful trimming of roughly €0.4 billion in excess SG&A. The bank also notes that initial inflation-linked benefits may not be reflected in the company's reported results until the second quarter.