Megatrend decarbonization: CHAR Technologies in the lead, BASF and Evonik stumbling?

CHAR Technologies – Focus on several megatrends

The Canadian cleantech company is addressing several megatrends with its pyrolysis technology: decarbonization, waste management, and CO2 markets. CHAR Technologies is on the verge of becoming a production company, which should have a significantly positive impact on its share price performance this year.

At the heart of the business model is the company's proprietary high-temperature pyrolysis (HTP) technology. This technology is used to process non-marketable wood and organic waste from forestry and other types of biomass. The result is biocarbon and biochar. The approach combines waste management, energy production, and climate protection in an industrially applicable process.

The first commercial plant is currently in the commissioning phase in Thorold, Canada. The plant was financed together with the infrastructure and industry specialist BMI Group. Production of biochar with an annual capacity of around 5,000 tons is scheduled to start there this month. Residual materials from forestry serve as input. The customers are gas networks and industrial companies.

The company has a large partnership network with world-renowned names, which spans the entire value chain. Its industrial partners include ArcelorMittal and its Canadian subsidiary Dofasco. CHAR also works with forestry-related organizations. In parallel with Thorold, the company is pushing ahead with many other projects.

The Canadians recently announced the conclusion of a formal license agreement for technological know-how with GazoTech SAS, a French energy developer. As a result, the Canadian technology will be used in France and selected European markets in the future.

CHAR's industrial ramp-up and global expansion are providing a steady stream of positive news flow. This should also be gradually reflected in the share price. At a current level of CAD 0.27 per share, the company is valued at only CAD 35 million.

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Evonik – Sentiment turns, dividend yield of over 6%

Sentiment for chemical stocks is turning. This is particularly evident in Evonik's share price performance. While the German specialty chemicals group's shares reached a record low of EUR 12.49 in January, they are now already within reach of the EUR 16 mark. At the beginning of the month, there was speculation about an extension of free emission allowances by the EU.

Handelsblatt reported that the EU Commission wanted to weaken its most important climate protection instrument, the European Emissions Trading System. The plan is now to issue free allowances over a longer period of time in order to relieve the burden on energy-intensive companies, such as those in the chemical industry. CEO Christian Kullmann has repeatedly criticized what he sees as an overly strict CO2 emissions regime, which he believes is severely damaging the competitiveness of important European industries.

The stock recently received a boost from analysts. Experts at US investment bank Goldman Sachs upgraded the shares from "Sell" to "Buy" and set a price target of EUR 18. This puts the US bank in stark contrast to the analyst community, which values the stock at an average price target of EUR 14.45.

According to preliminary figures, Evonik recorded a 7% decline in sales to EUR 14.1 billion in the past year. Adjusted EBITDA fell by 9% to EUR 1.87 billion, which was roughly in line with expert forecasts. The group recently announced an adjustment to its dividend policy. In future, Evonik intends to distribute 40 to 60% of its adjusted consolidated earnings. A dividend of EUR 1.00 is expected for this year, which corresponds to a generous yield of more than 6%. For the current year, the company is forecasting EBITDA before special items of between EUR 1.7 billion and EUR 2.0 billion.

BASF – Outperforming the DAX this year, but analysts remain skeptical

Analysts are not particularly enthusiastic about the chemical giant's prospects. On average, experts are assigning the shares a price target of EUR 48.50. The share is currently trading slightly above this at just under EUR 51. The group's management obviously has a different opinion on the valuation and launched a share buyback program last year. According to current information, the Ludwigshafen-based company acquired around 12 million of its own shares between the beginning of November and the beginning of February.

Analysts forecast revenue of EUR 61.3 billion and net profit of EUR 2.91 billion for 2026. The dividend yield is attractive at a solid 4%. With a value increase of almost 15%, the shares have significantly outperformed the leading index since the beginning of the year. There are increasing signs that sentiment and business performance are turning positive. The stock market is still skeptical. This is often a good breeding ground for rising prices.

The chemical industry has not had an easy time of it recently. However, the picture now appears to be brightening. Analysts are already becoming more optimistic about Evonik. In addition, chemical stocks offer attractive dividends. CHAR Technologies impresses with its technological approach and successful international expansion. Given its potential, the company's current valuation of CAD 35 million appears too low.