Nobel announced to have entered into a partnership with the Chinese company Quangxi CAVA Titanium Industry Co. Ltd for the production and supply of titanium dioxide. The cooperation involves the construction of a 100kt titanium dioxideplant in Qinzhou (China) which is due to start up in early 2014.
We understood will get a significant share of the output of the plant which allows to secure a portion of the titanium dioxide needs of the company in the rapidly growing Asian market. Given the fairly tight global titanium dioxide markets, we welcome this initiative, even if the plant will only be operational as from 2014. Titanium dioxide represents about 6% of the total raw materials, energy and other variable costs bill for .
No change to our BUY rating and € 60 target price. We continue to like Nobel for its leadership position in the global coatings market, good geo-mix (40% of revenue from emerging markets), strong balance sheet and clear valuation discount vs peers.
[RATING BUY (UNCHANGED); CURRENT PRICE € 48.52; TARGET PRICE € 60.00]