Umicore: Preview 1Q12 trading update

Umicore will publish its 1Q12 tradingupdate on 24 April before market. We remind that traditionally the group provides only a revenue trend (both on group level and per division) in its quarterly updates, while it usually also starts to offer FY recurring EBIT guidance as of its 1Q trading update.

We remind that FY11 revenue (excluding metal) grew by 15%, with the trends roughly equal in 1H and 2H. Double digit growth was recorded in Catalysis, Energy Materials and Recycling. Performance Materials grew by 6% in FY11 (flat in 2H).

We forecast1Q12 revenue (excluding metal) growth to have slowed down to +3.8% y/y, mainly because of a slowdown in Catalysis (which is the largest contributor to group revenue (excluding metal) representing about 36% of estimated 2012 total). Below is an overview of our divisional forecasts :
Catalysis: we forecast 1Q12 revenue to decline by 1% (vs 2H11 trend of +18% y/y and FY11 trend of +16y/y). We remind that car registrations in the (for Umicore) important European market declined by 7.7% in the first quarterof 2012. We expect Umicore to have continued to outperform the global market (as was the case already in 2011) because of a beneficial client mix & contract wins as well as growing revenue in the HDD market.

Energy Materials : we forecast 1Q12 revenue to have grown by 10%, mainly on the back of growth in the rechargeable battery materials business unit linked to (H)EVs. We remind that the 2H11 revenue trend was +18% y/y and the FY11 trend was+14% y/y.

Performance Materials : We forecast revenue to have decreased slightly by -1%, vs a 2H11 trend of flat revenue y/y. We remind that Performance Materials is the least structurally growing part of Umicore.
Recycling: we forecast revenue (excluding metal) to have increased by 10% in 1Q12 (vs 2H11 trend of +18% y/y and FY11 trend of +16y/y). Note that our proprietary precious metal price index relevant to Umicore is about 13% higher in 1Q12 vs 1Q11 while being roughly unchanged from 2H11 levels, so we expect the generally good supply conditions seen last yearto have continued in the first quarter.
As far as our FY12 forecasts are concerned, we are currently expecting a FY12 Recurring EBIT of € 426.4m, which represents an increase of about 2% over FY11 (€ 416.1m). Our forecasts are fairly close to the analystconsensus (€ 419.6m), and the same goes for future years (2013: KBCS € 460.9m, css € 459m – 2014: KBCS € 497.1m, css € 503.6m).

Our View:
After the strong share price performance of the past months Umicore is now trading at a P/E12e of 15.7x and an EV/REBITDA12e of 8.9x. We acknowledge the great LT growth prospects, although we believe the short term business momentum (especially in Catalysis) is getting a bit tougher. We stick to our Accumulate rating for now while we decided to increase our target price from € 39 to € 45.