KeyBanc Out Bullish On Olin, Says Chemical Manufacturer Has 'Favorable Supply-Demand Dynamics'

Olin Corporation OLN has strong positioning as a global chlorine derivatives leader and its Dow assets have been integrated well, according to KeyBanc Capital Markets, which is projecting year-on-year earnings growth for the company in 2019.

The Analyst

KeyBanc’s Michael Sison initiated coverage of Olin with an Overweight rating and $30 price target.  

The Thesis

Olin is estimated to have generated EBITDA growth of more than 30 percent to $1.23 billion in 2018, Sison said in the Sunday note. 

The strong performance was driven mainly by a supportive pricing environment in caustic soda, chlorine, ethylene dichloride and other chlorine derivatives, the analyst said. The company should be able to maintain this performance “over the next few years” owing to “favorable supply-demand dynamics,” he said. 

Olin is likely to generate EBITDA growth in 2019 — albeit at a low-single-digit pace — against a slowing economic backdrop, Sison said.

Headwinds are expected from lower pricing of caustic soda and another sluggish year at Winchester, he said. Yet lower turnaround costs, further epoxy recovery, caustic contract pricing, higher EDC/chlorine pricing and lower hydrocarbon costs could boost growth, the analyst said. 

Olin has a strong balance sheet, with FCF of around $500 million likely to be spent on debt reduction and share repurchases, according to KeyBanc. 

Price Action

Olin shares were down 1.01 percent at $23.49 at the time of publication Monday. 

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