陶氏（DOW）：增量逆风与资产价值：辩论开始转变？

2024A2025E2026E-41,767.043,178.0-4,120.05,099.0-0.521.4042,964.041,291.042,186.0 2027E44,676.05,823.01.9943,574.0 Laurence Alexander * | Equity Analyst(212) 284-2553 | lalexander@jefferies.comDaniel Rizzo * | Equity Analyst(212) 336-6284 | drizzo@jefferies.comKevin Estok * | Equity Associate(212) 778-8516 | kestok@jefferies.comXianrao Zhu * | Equity Associate+1 (212) 778-8742 | xzhu@jefferies.comCarol Jiang * | Equity Associate+1 (212) 284-1714 | cjiang@jefferies.com The Long View: DowInvestment Thesis / Where We DifferDow's slimmed-down portfolio is ostensibly a way to benefit from cheapUSnatural gas and global demand growth for consumer goods andconsumer durables. However, in effect, it will likely act as a levered proxy foremerging market consumer demand, with operating leverage shaped more byhydrocarbon spreads than volumes.Base Case,$30, +8%•Sluggish demand in 2025•In 2027, lagged impact of credit cycle fades,transitioning to a durable goods restock cycle•Dow retains most of the benefits from cost cuts•$4.54bn EBITDA in 2026E, $0.80 EPS•7.3x 2026E EBITDA = $30Sustainability MattersTop Material Issue(s): 1) Product Design & Lifecycle Management.Dow has multiple initiatives toimprove the recyclability of its products while using more bio-naphtha and pyrolysis oil from plastic waste.2)Ecological Impacts.Debates about microplastics and regulations curtailing plastic affect both the S/D balance and the litigation landscape.Company Target(s): 1)Reduce carbon emissions by ~30% by 2030, neutral by 2050.2)$1bn EBITDA fromnet-zero carbon cracker complex in Alberta.3)By 2030, enable 1m mt of plastic to be collected, reusedor recycled.4)By 2035, enable 100% of Dow products sold into packaging applications to be reusable orrecyclable.5)~2MM MTA CO2Qs for Mgmt: 1)What are the technical hurdles involved in the Alberta net-zero cracker, and where will itsit on the cost curve?2)What are the current revenue, growth rate, and margins from bio-based and low-carbon products?3)As the price for CO2 rises, how does it affect where crude oil-to-chemical projectssit on the cost curve relative to Dow’s assets?ESG Sector Deep Dive: ChemicalsPlease see important disclosure information on pages 4 - 10 of this report.This report is intended for Jefferies clients only. Unauthorized distribution is prohibited. reduction by 2025 and ~5MM MTA CO2 Upside Scenario,$90, +224%•Growth investments add $4bn to peak EBITDA•Combination of stronger demand and newproject starts•Strong Chinese consumer demand lifts oil to >$90/bbl•Downstream margins improve ~$0.05/lb onaverage•$15bn peak EBITDA, $12 EPS•5x peak EBITDA = $90reduction by 2030. Downside Scenario,$20, -28%•Recession clips sales by ~15%•Oil slips & naphtha dislocates ~20%•Cost curve flattens,MTO provides somesupport•Cost cuts of ~1% of sales to offset•50% of replacement value, 10% dividend yield•~8x trough EBITDA of $4bn = $20Catalysts$0.01/lb in margin across commodity assets = ~$0.82 to EPS$0.01/lb in ethylene margin = ~$0.32 to EPS$10/bbl oil = $1.15-$1.45 to EPS$1bn growth capex = ~$0.15 to EPS$1bn buyback = ~$0.08 to EPS7-10 years of consistent dividend growth = 2-3x onEPS 2 Exhibit 1 - DOW Income Statement.Net Sales% ChangeCost of Goods SoldGross ProfitGross Margin% ChangeSG&A ExpenseSG&A/Sales% ChangeR&D ExpenseR&D/Sales% ChangeSundry Income (Expense) - net% ChangeEquity in earnings of nonconsolidated affiliates% ChangeOperating ProfitOperating Margin% ChangeInterest Expense% ChangeOther Income (Expense)Pretax IncomePretax Margin% ChangeTaxesTax RateMinority InterestNet IncomeNet Margin% ChangeBasic Shares Outstanding% ChangeFully Diluted Shares Outstanding% ChangeBasic EPS% ChangeFully Diluted EPS% ChangeSource: Jefferies, Company DataPlease see important disclosure information on pages 4 - 10 of this report.This report is intended for Jefferies clients only. Unauthorized distribution is prohibited. Company DescriptionDowDow Inc. is a leading global materials science company. Dow’s portfolio comprises six global business units, organized into three operating segments:Performance Materials & Coatings, Industrial Intermediates & Infrastructure, and Packaging & Specialty Plastics.Company Valuation/RisksDowOur 12-month price target for Dow is $30, 7.3x 2026E EBITDA. Our target is based on a weighted-average of peak, trough, replacement value, LBO,DCF, and DDM models, as well as peer comparisons. Key risks include end-market trends (particularly in industrial, auto, construction, and ag), thepace of capacity additions (particularly in the ethylene change), volatility in the oil gas and ethane-naphtha spreads, and the impact of interest rateson the valuation level that constitutes sustainable dividend support.Macquarie Group LimitedValuation:Our price target is based on a DCF valuation incorporating a 4.5% Risk Free Rate, 6% equity risk premium and 1.0 beta.Upside Risks:The upside risk to our price target is further expansion in the target PE on the MAM business, which struct