In accordance with the EGM resolution last November, which set the conditions for a share buyback (between HUF 2,000-2,800, maximum 10% of total shares), BorsodChem commissioned HSBC to purchase treasury shares from May 30 to Sept 4 in order to maintain the share price.
Since BorsodChem balance sheet is relatively stretched after recent investments, the company does not have significant room for share repurchases. At the end of the first quarter, net debt to equity ratio stood at 53.8%, while net debt to EBITDA was 2.6. This leads us to believe that BorsodChem could only buy own shares for a few billions of forints (probably no more than HUF 2-3bn), which is not too much on the market, especially as Rahimkulov family invests much more into BorsodChem shares. Therefore, the measure could only be used to support the share price on relatively illiquid days. We maintain our Hold recommendation on the stock, with a fair value estimate of HUF 2,448 per share.