External broker reports(aggregated public sources), Axis Direct

Axis Direct

External broker reports(aggregated public sources)

Axis Direct is the flagship brand under Axis Securities Limited, a subsidiary of Axis Bank in India. 

Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

Thematic (Sector/Industry)

<ul><li>The Union Budget 2023-24 lived up to all the market expectations, which was driven primarily by capital expenditure while simultaneously providing an adequate thrust to rural welfare and agriculture.</li><li>While the government successfully achieved the fiscal deficit target for FY23, it has now pegged a fiscal deficit target of 5.9% for FY24, which seems achievable.</li><li>This year’s Budget rightly focused more on Capex spending (to the tune of Rs 10 Lc Cr) with the government’s plans to provide a significant thrust to the country’s infrastructure development including impetus to the Roads, Railways, Airways, Ports, Mass Transports, Waterways, and Logistics Infra development.</li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

The Union Budget 2023-24 lived up to all the market expectations, which was driven primarily by capital expenditure while simultaneously providing an adequate thrust to rural welfare and agriculture.While the government successfully achieved the fiscal deficit target for FY23, it has now pegged a fiscal deficit target of 5.9% for FY24, which seems achievable.This year’s Budget rightly focused more on Capex spending (to the tune of Rs 10 Lc Cr) with the government’s plans to provide a significant thrust to the country’s infrastructure development including impetus to the Roads, Railways, Airways, Ports, Mass Transports, Waterways, and Logistics Infra development.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Research from Water Tower Research, Water Tower Research

Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Equity Research Firm

<h3>KEY HIGHLIGHTS</h3>
<ul>
<li>WTR-CMI last week.&nbsp;The market rebounded last week, with both the S&amp;P 500 (up 2.0%) and the Russell 2000 (up 1.6%) ending the week higher. Our WTR-CMI index outperformed the broader market by appreciating 2.9% during the week, led by a 27.3% gain by EAF, as the stock recovered from the prior weeks’ sell-off and benefited from the restart of its Mexican plant. Lithium stocks continued to underperform on concerns of a slower uptake of EVs given escalating costs and growing economic uncertainty, with LTHM, LAC, and ALB losing 2-4% of their value last week.</li>
<li>Herbicide optionality.&nbsp;Although EU member countries failed to agree on a one-year extension of&nbsp;marketing authorization for glyphosate—the workhouse of broad spectrum herbicides the world over—the College of Commissioners could now approve the rules of extension on its own to bridge the time to mid-2023 when the European Food Safety Authority’s (EFSA) reassessment of the active substance is expected to come out. Meanwhile,&nbsp;CTVA announced&nbsp;the launch of a new post-emergent broad spectrum herbicide formulation for corn that includes three non-glyphosate ingredients, as the ag industry is preparing for the future without glyphosate.</li>
<li>Europe’s commercial vehicle sales fail to recover.&nbsp;While the passenger vehicle market in Europe may have stabilized, with modest growth in the last two months,&nbsp;commercial vehicle registrations&nbsp;continued to decline in October and are down 16.8% YTD.</li>
<li>Canada’s EV sales lag.&nbsp;Despite an ambitious goal of 60% of new vehicle sales being EVs by 2030, the&nbsp;country is trailing other nations&nbsp;in EV adoption, and would need to see the EV sales pace pick up from ~100,000 annually in 2022 to 1 million by 2030, a 10-fold increase over eight years. To come even close, the country would need to invest in charging infrastructure and higher consumer rebates.</li>
</ul>
<h3>WTR-CMI WEEKLY PERFORMANCE</h3>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/313/140/original/image_82077716821669845010899.png?1669845013" class="editor-image img-responsive" data-smartkarma-image-id="313140"></figure>
<div class="content-remarks">
<p>Source: Y-Charts as of November 25 close</p>
</div>
<h2>Ag-Tech and Bio-Ag</h2>
<p>Acceptance of biologics continues to accelerate.&nbsp;Record-high agricultural input costs, especially those of the energy-dependent fertilizer sector, have been a source of concern for farmers the past two years. With the war in Ukraine continuing to limit some fertilizer availability due to anti-Russian and Belorussian sanctions and the high cost and limited availability of European energy due to the curtailment of Russian oil and gas imports, 2023 isn’t expected to offer much in the way of cost relief for the stressed farmer. However, a positive byproduct of this trend is farmers’ willingness to explore all options when it comes to reducing their input costs, while maximizing their fields’ yields. One way to accomplish that is through the use of biologics, such as bio-based soil conditioners, inoculants, and pesticides, which can result in&nbsp;lower use of fertilizers&nbsp;and other chemical-based crop inputs. Another area where biologics are making strong inroads is in seed treatment applications. We’ve previously written about BIOX’s ability, especially after merging with Marrone Bio Innovations, to offer farmers 100% biologic-based seed treatment options. Another private company, US based Indigo, recently commercialized a&nbsp;bio-based fungicide&nbsp;for use in seed treatment applications. We see growing acceptance of biological crop inputs by markets outside organic and produce farming, including those in row crops and cereals, as a sustainable driver of growth for bio-innovator companies such as BIOX and BHIL, as well as biotech divisions of ag-chem majors, such as FMC, CTVA, and AVD.</p>
<h2>Automotive &amp; Transportation</h2>
<p>Semiconductor shortage and COVID lockdowns continue to crimp auto production.&nbsp;Toyota, the world’s largest automaker,&nbsp;reduced its production plans for December&nbsp;and reduced its FY22 (Mar-23) annual production goal by half a million units, as semiconductor shortages and other supply chain issues stubbornly persist. Similarly, UK’s Jaguar-Land Rover&nbsp;announced reduced output&nbsp;at its UK factories through March 2023, likewise citing chip shortages as the reason. In China, repeated, severe, and often arbitrary COVID-related shutdowns, which are sparking significant unrest in the country, are also affecting companies’ abilities to operate in the region. VW recently&nbsp;lowered its annual sales target&nbsp;in China by 14% from 3.85 million units to 3.3 million, citing China’s zero-COVID policy for the expected shortfall.</p>
<p>With semiconductor and other supply-chain issues not expected to be resolved until late 2023 and with the spreading civil unrest in China and potential for severe government actions against its citizens resulting in further production disruptions and logistical snarls, the automotive industry, including the burgeoning EV sector, may experience slower-than-expected recovery/growth over the next six to nine months, suggesting continuing volume pressures on Tier-1 automotive suppliers, including automotive coatings manufacturers such as PPG and AXTA, as well as material suppliers such as FUL, AVNT, HXL, and others. Lower auto build rates and civil unrest may also constrain demand for steel, which would be a negative for EAF and MTX.</p>
<h2>Energy &amp; Battery Technology</h2>
<p>Welcome to the real world.&nbsp;We’ve repeatedly highlighted in our publications our concern with the growing influence of China as a hub for production of everything EV and renewable energy related, with the country controlling 60-100% of production of everything from graphite and lithium to battery components to finished batteries essential to EV and energy storage industries. It seems that geopolitical and supply chain realities exposed by the COVID pandemic and Russia’s invasion of Ukraine have finally woken up Western governments to these facts.</p>
<p>In our previous issues, we talked about the Canadian government’s efforts to remove Chinese influence from its domestic energy, battery, and materials industry. More recently, in Germany, the Association of German Chambers of Industry and Commerce is asking the government to develop new policies that would enable the country’s economy and its industries to&nbsp;lower their dependence of China. Already, Germany’s foreign ministry is considering&nbsp;tightening rules around disclosure&nbsp;of information and performance of stress tests for companies in various industries with exposure to China, including the automotive sector. As every action procures a reaction, the initiative may result in even greater difficulty for Germany’s auto OEMs in penetrating the Chinese EV market—the world’s largest at this moment—where Germany’s brands are already&nbsp;struggling to gain share. We believe even more can and needs to be done to reduce China’s control over the world’s ability to transition to new energy platforms, whether in transportation, or energy production.</p>
<p>A recent&nbsp;report from a US investment bank&nbsp;claims the US and EU can end their dependence on China for materials critical to this transition by 2030, based on estimates of required investments and government efforts to direct public funds toward this effort, such as the recently enacted Inflation Reduction Act in the US. While we find this goal not only laudable, but imperative, we are somewhat skeptical of the timetable, as funding is not the only limiting factor in the equation. As we repeatedly highlighted, achieving such goals would appear to necessitate a material revision of existing rules and regulations around mining and processing of metals and recycling end-of-life batteries. Unfortunately, from declaring lithium a carcinogen (as is being considered in the EU), to denying building permits at state and local levels, to sometimes frivolous activist groups’ lawsuits, to trying to delay development of new unconventional battery metal resources, to failing to develop an effective energy policy that would lead to lower energy (and thus production) costs, federal and state governments in the US and Europe seem to be moving in the opposite direction.</p>
<h2>Chemicals &amp; Materials Technology</h2>
<p>We have often maintained that the chemicals and materials industry is not only at the forefront of the efforts to improve the sustainability of manufacturing, lowering its carbon footprint and reliance on petrochemical raw materials, but producing products that enable their customers to do the same. While the plastics industry has been facing significant pressure in the court of public opinion when it comes to the industry’s impact on the environment, it is also the industry that is making the greatest strides in both improving its&nbsp;<a href="https://www.plasticstoday.com/automotive-and-mobility/polyplastics-signals-sustainability-goals?ADTRK=InformaMarkets&amp;utm_source=eloqua&amp;utm_medium=email&amp;utm_campaign=15_NL_PT_Automotive_Edit_Sub_20221123&amp;sp_cid=13872&amp;utm_content=15_NL_PT_Automotive_Edit_Sub_20221123&amp;sp_aid=25259&amp;sp_rid=25509727&amp;sp_eh=8c4df0147173401d7475f6b9df5d9c368c8605c08aa4346c2916fde1dbfaee68" target="_blank" rel="noopener">own sustainability </a>characteristics&nbsp;and providing solutions to improve and thereby accelerate sustainability in other industries, including the rapidly developing&nbsp;EV and charging infrastructure sectors.</p>
<p>We believe companies such as AVNT, LOOP, and FUL, among others, stand to benefit from these trends and opportunities and should be considered by investors looking to participate in the sustainability and energy transformation megatrends currently underway.</p>
<h2>Rating and Price Target Changes</h2>
<p>EAF –&nbsp;BMO raised its price target from $5 to $6 and maintained its Market Perform rating.</p>
<p>Recent Reports and Future Events</p>
<p>Westwater Resources, Inc. (WWR) – Fireside Chat: VP of Sales &amp; Marketing Jay Wago, December 13, 2022, at 11:30 am EST</p>
<p>TMC the metals company (TMC) – Management Series Report – Collecting Nodules and Scientific Data as Regulation Timeline Nears</p>
<p>TMC the metals company, Inc. (TMC) – Initiation of Coverage – Tapping Untapped Resource to Address Unmet Need</p>
<p>Westwater Resources, Inc. (WWR) – Company Update Report – Steady Progress Deserves a Closer Look</p>
<h3>DISCLOSURES</h3>
<div></div>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>Dmitry Silversteyn, who is the writer of this report, covers the BioEconomy and Chemicals &amp; Materials Technology sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY HIGHLIGHTS

WTR-CMI last week.&nbsp;The market rebounded last week, with both the S&amp;P 500 (up 2.0%) and the Russell 2000 (up 1.6%) ending the week higher. Our WTR-CMI index outperformed the broader market by appreciating 2.9% during the week, led by a 27.3% gain by EAF, as the stock recovered from the prior weeks’ sell-off and benefited from the restart of its Mexican plant. Lithium stocks continued to underperform on concerns of a slower uptake of EVs given escalating costs and growing economic uncertainty, with LTHM, LAC, and ALB losing 2-4% of their value last week.
Herbicide optionality.&nbsp;Although EU member countries failed to agree on a one-year extension of&nbsp;marketing authorization for glyphosate—the workhouse of broad spectrum herbicides the world over—the College of Commissioners could now approve the rules of extension on its own to bridge the time to mid-2023 when the European Food Safety Authority’s (EFSA) reassessment of the active substance is expected to come out. Meanwhile,&nbsp;CTVA announced&nbsp;the launch of a new post-emergent broad spectrum herbicide formulation for corn that includes three non-glyphosate ingredients, as the ag industry is preparing for the future without glyphosate.
Europe’s commercial vehicle sales fail to recover.&nbsp;While the passenger vehicle market in Europe may have stabilized, with modest growth in the last two months,&nbsp;commercial vehicle registrations&nbsp;continued to decline in October and are down 16.8% YTD.
Canada’s EV sales lag.&nbsp;Despite an ambitious goal of 60% of new vehicle sales being EVs by 2030, the&nbsp;country is trailing other nations&nbsp;in EV adoption, and would need to see the EV sales pace pick up from ~100,000 annually in 2022 to 1 million by 2030, a 10-fold increase over eight years. To come even close, the country would need to invest in charging infrastructure and higher consumer rebates.

WTR-CMI WEEKLY PERFORMANCE


Source: Y-Charts as of November 25 close

Ag-Tech and Bio-Ag
Acceptance of biologics continues to accelerate.&nbsp;Record-high agricultural input costs, especially those of the energy-dependent fertilizer sector, have been a source of concern for farmers the past two years. With the war in Ukraine continuing to limit some fertilizer availability due to anti-Russian and Belorussian sanctions and the high cost and limited availability of European energy due to the curtailment of Russian oil and gas imports, 2023 isn’t expected to offer much in the way of cost relief for the stressed farmer. However, a positive byproduct of this trend is farmers’ willingness to explore all options when it comes to reducing their input costs, while maximizing their fields’ yields. One way to accomplish that is through the use of biologics, such as bio-based soil conditioners, inoculants, and pesticides, which can result in&nbsp;lower use of fertilizers&nbsp;and other chemical-based crop inputs. Another area where biologics are making strong inroads is in seed treatment applications. We’ve previously written about BIOX’s ability, especially after merging with Marrone Bio Innovations, to offer farmers 100% biologic-based seed treatment options. Another private company, US based Indigo, recently commercialized a&nbsp;bio-based fungicide&nbsp;for use in seed treatment applications. We see growing acceptance of biological crop inputs by markets outside organic and produce farming, including those in row crops and cereals, as a sustainable driver of growth for bio-innovator companies such as BIOX and BHIL, as well as biotech divisions of ag-chem majors, such as FMC, CTVA, and AVD.
Automotive &amp; Transportation
Semiconductor shortage and COVID lockdowns continue to crimp auto production.&nbsp;Toyota, the world’s largest automaker,&nbsp;reduced its production plans for December&nbsp;and reduced its FY22 (Mar-23) annual production goal by half a million units, as semiconductor shortages and other supply chain issues stubbornly persist. Similarly, UK’s Jaguar-Land Rover&nbsp;announced reduced output&nbsp;at its UK factories through March 2023, likewise citing chip shortages as the reason. In China, repeated, severe, and often arbitrary COVID-related shutdowns, which are sparking significant unrest in the country, are also affecting companies’ abilities to operate in the region. VW recently&nbsp;lowered its annual sales target&nbsp;in China by 14% from 3.85 million units to 3.3 million, citing China’s zero-COVID policy for the expected shortfall.
With semiconductor and other supply-chain issues not expected to be resolved until late 2023 and with the spreading civil unrest in China and potential for severe government actions against its citizens resulting in further production disruptions and logistical snarls, the automotive industry, including the burgeoning EV sector, may experience slower-than-expected recovery/growth over the next six to nine months, suggesting continuing volume pressures on Tier-1 automotive suppliers, including automotive coatings manufacturers such as PPG and AXTA, as well as material suppliers such as FUL, AVNT, HXL, and others. Lower auto build rates and civil unrest may also constrain demand for steel, which would be a negative for EAF and MTX.
Energy &amp; Battery Technology
Welcome to the real world.&nbsp;We’ve repeatedly highlighted in our publications our concern with the growing influence of China as a hub for production of everything EV and renewable energy related, with the country controlling 60-100% of production of everything from graphite and lithium to battery components to finished batteries essential to EV and energy storage industries. It seems that geopolitical and supply chain realities exposed by the COVID pandemic and Russia’s invasion of Ukraine have finally woken up Western governments to these facts.
In our previous issues, we talked about the Canadian government’s efforts to remove Chinese influence from its domestic energy, battery, and materials industry. More recently, in Germany, the Association of German Chambers of Industry and Commerce is asking the government to develop new policies that would enable the country’s economy and its industries to&nbsp;lower their dependence of China. Already, Germany’s foreign ministry is considering&nbsp;tightening rules around disclosure&nbsp;of information and performance of stress tests for companies in various industries with exposure to China, including the automotive sector. As every action procures a reaction, the initiative may result in even greater difficulty for Germany’s auto OEMs in penetrating the Chinese EV market—the world’s largest at this moment—where Germany’s brands are already&nbsp;struggling to gain share. We believe even more can and needs to be done to reduce China’s control over the world’s ability to transition to new energy platforms, whether in transportation, or energy production.
A recent&nbsp;report from a US investment bank&nbsp;claims the US and EU can end their dependence on China for materials critical to this transition by 2030, based on estimates of required investments and government efforts to direct public funds toward this effort, such as the recently enacted Inflation Reduction Act in the US. While we find this goal not only laudable, but imperative, we are somewhat skeptical of the timetable, as funding is not the only limiting factor in the equation. As we repeatedly highlighted, achieving such goals would appear to necessitate a material revision of existing rules and regulations around mining and processing of metals and recycling end-of-life batteries. Unfortunately, from declaring lithium a carcinogen (as is being considered in the EU), to denying building permits at state and local levels, to sometimes frivolous activist groups’ lawsuits, to trying to delay development of new unconventional battery metal resources, to failing to develop an effective energy policy that would lead to lower energy (and thus production) costs, federal and state governments in the US and Europe seem to be moving in the opposite direction.
Chemicals &amp; Materials Technology
We have often maintained that the chemicals and materials industry is not only at the forefront of the efforts to improve the sustainability of manufacturing, lowering its carbon footprint and reliance on petrochemical raw materials, but producing products that enable their customers to do the same. While the plastics industry has been facing significant pressure in the court of public opinion when it comes to the industry’s impact on the environment, it is also the industry that is making the greatest strides in both improving its&nbsp;own sustainability characteristics&nbsp;and providing solutions to improve and thereby accelerate sustainability in other industries, including the rapidly developing&nbsp;EV and charging infrastructure sectors.
We believe companies such as AVNT, LOOP, and FUL, among others, stand to benefit from these trends and opportunities and should be considered by investors looking to participate in the sustainability and energy transformation megatrends currently underway.
Rating and Price Target Changes
EAF –&nbsp;BMO raised its price target from $5 to $6 and maintained its Market Perform rating.
Recent Reports and Future Events
Westwater Resources, Inc. (WWR) – Fireside Chat: VP of Sales &amp; Marketing Jay Wago, December 13, 2022, at 11:30 am EST
TMC the metals company (TMC) – Management Series Report – Collecting Nodules and Scientific Data as Regulation Timeline Nears
TMC the metals company, Inc. (TMC) – Initiation of Coverage – Tapping Untapped Resource to Address Unmet Need
Westwater Resources, Inc. (WWR) – Company Update Report – Steady Progress Deserves a Closer Look
DISCLOSURES

Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  Dmitry Silversteyn, who is the writer of this report, covers the BioEconomy and Chemicals &amp; Materials Technology sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.  The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

Mat-Chem Notes For the Week Ended November 25, 2022

External broker reports(aggregated public sources), Mirae Asset Securities

Mirae Asset Securities

Leading full-service brokerage firm in Vietnam. 

Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

<ul>
<li>As bearishness prevailed, VNIndex experienced a severe decline after instantly reaching the highest daily level of 996.1 pts (-0.1% DoD) following the ATO session.</li>
<li>Considerable losses extended when selling pressure spread from Real Estates sector to other sectors.</li>
<li>After lunch, the index dropped to the lowest daily level of 969.7 pts (-2.8% DoD) at 13:05 and recovered to close at 975.2 pts (-2.2% DoD).</li>
</ul>
<div class="content-highlight"><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></div>


As bearishness prevailed, VNIndex experienced a severe decline after instantly reaching the highest daily level of 996.1 pts (-0.1% DoD) following the ATO session.
Considerable losses extended when selling pressure spread from Real Estates sector to other sectors.
After lunch, the index dropped to the lowest daily level of 969.7 pts (-2.8% DoD) at 13:05 and recovered to close at 975.2 pts (-2.2% DoD).

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

<h3>KEY HIGHLIGHTS</h3>
<div></div>
<ul>
<li>WTR-CMI last week.&nbsp;Reversing the prior week’s trend, the stock market pulled back last week following the release of disappointing inflation data, with the Russell 2000 and the S&amp;P 500 losing 4.5% and 4.8% of their value, respectively. Our WTR-CMI index of 30 chemicals and materials technology stocks underperformed the broader market by declining 7.2% for the week.&nbsp;EMN’s preannouncement&nbsp;of lower 3Q22 and 2022 expectations drove the stock down nearly 15% and eight of the 30 stocks in our index posted double-digit declines. With all stocks in our WTR-CMI index losing value last week, PKE, AVD, and CTVA delivered relative outperformance by declining less than 2%.</li>
<li>Even ag-chem majors are retrenching.&nbsp;While the overall tone of&nbsp;CTVA’s Investor Day&nbsp;held last week was positive, highlighted by the rollout of a robust R&amp;D pipeline and an announcement of additional $2 billion in share repurchases (on top of existing $1.5 billion authorization), management also laid out plans for&nbsp;coping with slowing economic growth and high inflation expectations&nbsp;by exiting 35 countries and trimming its workforce by 5%.</li>
<li>Tale of two regions.&nbsp;While US passenger vehicle sales in August edged up Y/Y and new&nbsp;car registrations in the EU&nbsp;grew by 4.4% last month,&nbsp;Y/Y growth of passenger vehicles in China was 36% in August&nbsp;following the end of a two-month lockdown of Shanghai and a reduction in the gasoline tax at the end of June. Although the remaining four months of 2022 will feature easy Y/Y comps, given the depressed state of the global auto industry at the end of 2021, slowing economic growth and high energy prices may keep the recovery muted, with questions remaining with respect to 2023. PPG and AXTA may therefore continue to underperform, given their large exposure to the automotive and transportation markets.</li>
<li>CMP stepping up its lithium game.&nbsp;Having previously previewed its ambitions of becoming a lithium supplier to the EV battery industry using its existing Salt Lake resources,&nbsp;CMP picked EnergySource Minerals&nbsp;as its direct lithium extraction (DLE) technology provider and announced a $252 million&nbsp;strategic investment&nbsp;by Koch Minerals &amp; Trading, LLC (KM&amp;T) to help finance Phase 1 of its lithium project.</li>
</ul>
<h3>WTR-CMI WEEKLY PERFORMANCE</h3>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/299/221/original/image_26154726621663790447378.png?1663790451" class="editor-image img-responsive" data-smartkarma-image-id="299221"></figure>
<h2>Ag-Tech and Bio-Ag</h2>
<p>September USDA report acknowledges reality.&nbsp;We recently highlighted the disconnect between the August USDA Crop Production Report and the boots-on-the-ground crop tour that implied much lower commodity grain expectations. Last week, the USDA released its&nbsp;September report, which reflected the crop tour’s findings and lowered its outlook for soybean and corn production by lowering the three main components:&nbsp;planted acre, harvested acres, and yield per acre. Weather pressures and challenges securing sufficient and timely quantities of fertilizers and pesticides may have been behind the reduction in productivity expectations for US farmers reflected in the report. Lower expected Brazilian crop and what appears to be lower-than-anticipated US production are likely to result in stable, if not higher, commodity crop prices, which would go a long way in helping US farmers deal with still-elevated input costs in the 2022-23 season. Also mitigating lower production is&nbsp;lower demand from industrial end markets, such as ethanol and biofuels, which are slowing due to the overall slowdown in the US economy and miles driven.</p>
<p>Farmers remain cautious.&nbsp;Creighton University’s Rural Mainstreet Index&nbsp;(RMI) reading for September improved somewhat from August’s reading of 44 to 46.3, marking the fifth straight month of readings under 50, with 50 being a growth-neutral outlook, signaling that US farmers are bracing for another difficult year and a downturn in economic activity. Supply chain disruptions and inflationary pressures for everything from inputs to fuel to equipment to land values continue to weigh on farmers’ minds. Farmers and bankers are now also bracing for escalating interest rates, even higher farm input costs, and drought. Higher expected crop values as mentioned above may help mitigate some of the cost pressures farmers will be facing, but high energy and natural gas costs constraining fertilizer and pesticide production and leading to their higher costs and still-snarled logistics may result in even greater scarcity of needed inputs, suggesting ag-chem companies such as CTVA, FMC, and AVD, as well as CF and MOS may continue to enjoy strong demand. It may also provide opportunities for companies offering different technologies, such as bio-based pesticides, seed treatment, and soil conditioning to expand their geographic and crop reach, as farmers look for every advantage and avenue to facilitate their production. This would be a positive for emerging bio-ag companies such as BIX and BHIL.</p>
<h2>Battery and Energy Technology</h2>
<p>EV growth spurs demand and drives higher metal prices.&nbsp;As EV growth continues to accelerate, supply of metals required to build EV batteries is barely keeping pace, driving metal prices higher as a result,&nbsp;with lithium carbonate prices in China&nbsp;setting a new record at just over $71/kg. Nor is lithium an exception. Brazilian mining company&nbsp;Vale expects nickel demand&nbsp;to surge 44% by 2030 from current levels, with most new supply coming from Indonesia, Canada, and Australia. The company also expects there to be a structural deficit of the metal even when factoring in current announced production and mining expansions. An emerging player with the potential to become the second-largest nickel supplier in the world in the mid-term and the largest in the longer term is a Canadian late-stage development company&nbsp;The Metals Company&nbsp;(NASDAQ: TMC), which is getting ready to commercialize undersea collection and processing of polymetallic nodules found in ocean depths between Mexico and Hawaii.</p>
<p>Working at cross purposes.&nbsp;We recently wrote about the disconnect between national governments’ efforts to expand and domesticate the sourcing and production of materials critical in enabling the EV and energy storage transformation on the one hand and local government agencies and NGOs doing their best to push “not in my back yard” agenda when it comes to mines, processing plants, and other facilities needed to support green energy goals. We previously highlighted the issues PLL is having in securing the permits needed to begin mining and processing lithium in North Carolina. Another development-stage lithium player running into similar NGO obstacles is LAC, which is facing strong opposition to its&nbsp;Nevada mine development from environmental groups and other NGOs. While Tesla CEO thinks mining is “relatively easy” compared with lithium refining competencies and is exploring&nbsp;Tesla getting into the lithium processing business, the fact remains that additional sources of lithium, whether by direct lithium extraction from brine à la CMP and LAC, spodumene mines, or expansion of brine extraction in the Andes, are sorely needed to decouple our dependence on China and other geopolitically sensitive neighborhoods. That means governments will need to rethink their approach to incentivizing domestic development of mine and processing plant resources.</p>
<h2>Chemicals and Materials News</h2>
<p>N.I.M.B.Y.&nbsp;Everyone wants a more sustainable world. Everyone wants less plastic and other pollution. But it seems nobody wants plants and facilities that can deliver on those wants in their neighborhood—Not in My Back Yard syndrome—at least not in developed countries with a strong NGO ecosystem. The problem goes beyond permitting new mineral and metal mines, processing plants, or refineries. Even scrap plastic sorting facilities are frowned upon. Just ask PureCycle Technologies’ (NASDAQ: PCT) CEO Dustin Olson, who has received a&nbsp;letter signed by 50 different NGOs&nbsp;requesting the company abandon its plans for a new plastic sorting facility in Florida.</p>
<h2>Rating and Price Target Changes</h2>
<p>ASH –&nbsp;Credit Suisse initiated coverage of the stock with an Outperform rating and $210 price target (PT).</p>
<p>CTVA –&nbsp;KeyBanc raised its PT to $72 from $64 and reiterated its Overweight rating; BMO raised its PT to $72 from $66 and reiterated its Outperform rating; JP Morgan raised its PT to $65 from $63 and reiterated its Outperform rating; Jefferies raised its PT to $77 from $70 and reiterated its Buy recommendation; Deutsche Bank raised its PT to $75 from $68 and reiterated its Buy recommendation.</p>
<p>EMN –&nbsp;Jefferies lowered its PT to $94 from $97 and maintained its Hold rating; Tudor Pickering lowered its PT to $98 from $105 and maintained its Hold rating; Stifel Nicolaus lowered its PT to $112 from $134 and reiterated its Buy recommendation; CFRA lowered its PT to $110 rom $115 and reiterated its Buy rating; Wells Fargo downgraded the stock to Equal Weight from Overweight and lowered its PT to $95 from $110; KeyBanc lowered its PT to $111 from $125 and reiterated its Overweight rating; Citigroup lowered its PT to $93 from $102 and maintained its Neutral rating; RBC lowered its PT to $82 from $97 and maintained its Sector Perform rating; Deutsche Bank lowered its PT to $95 from $115 and reiterated its Buy recommendation.</p>
<p>LTHM –&nbsp;Vertical Research downgraded the stock to Hold from Buy, despite raising its PT to $35 from $33.</p>
<p>PPG –&nbsp;Wells Fargo lowered its PT to $130 from $135 and maintained its Equal Weight rating.</p>
<p>SHW –&nbsp;Evercore ISI lowered its PT to $260 from $285 and reiterated its Outperform rating.</p>
<h2>Recent WTR Publications and Upcoming Events</h2>
<p>Management Series Report – Loop Industries Founder and CEO Daniel Solomita (NASDAQ: LOOP)</p>
<p>Management Series Report and 2Q22 Update for Westwater Resources (NYSE: WWR)</p>
<p>Initiation of Coverage – Westwater Resources (NYSE: WWR)</p>
<h3>DISCLOSURES</h3>
<div></div>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>Dmitry Silversteyn, who is the writer of this report, covers the BioEconomy and Chemicals &amp; Materials Technology sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY HIGHLIGHTS


WTR-CMI last week.&nbsp;Reversing the prior week’s trend, the stock market pulled back last week following the release of disappointing inflation data, with the Russell 2000 and the S&amp;P 500 losing 4.5% and 4.8% of their value, respectively. Our WTR-CMI index of 30 chemicals and materials technology stocks underperformed the broader market by declining 7.2% for the week.&nbsp;EMN’s preannouncement&nbsp;of lower 3Q22 and 2022 expectations drove the stock down nearly 15% and eight of the 30 stocks in our index posted double-digit declines. With all stocks in our WTR-CMI index losing value last week, PKE, AVD, and CTVA delivered relative outperformance by declining less than 2%.
Even ag-chem majors are retrenching.&nbsp;While the overall tone of&nbsp;CTVA’s Investor Day&nbsp;held last week was positive, highlighted by the rollout of a robust R&amp;D pipeline and an announcement of additional $2 billion in share repurchases (on top of existing $1.5 billion authorization), management also laid out plans for&nbsp;coping with slowing economic growth and high inflation expectations&nbsp;by exiting 35 countries and trimming its workforce by 5%.
Tale of two regions.&nbsp;While US passenger vehicle sales in August edged up Y/Y and new&nbsp;car registrations in the EU&nbsp;grew by 4.4% last month,&nbsp;Y/Y growth of passenger vehicles in China was 36% in August&nbsp;following the end of a two-month lockdown of Shanghai and a reduction in the gasoline tax at the end of June. Although the remaining four months of 2022 will feature easy Y/Y comps, given the depressed state of the global auto industry at the end of 2021, slowing economic growth and high energy prices may keep the recovery muted, with questions remaining with respect to 2023. PPG and AXTA may therefore continue to underperform, given their large exposure to the automotive and transportation markets.
CMP stepping up its lithium game.&nbsp;Having previously previewed its ambitions of becoming a lithium supplier to the EV battery industry using its existing Salt Lake resources,&nbsp;CMP picked EnergySource Minerals&nbsp;as its direct lithium extraction (DLE) technology provider and announced a $252 million&nbsp;strategic investment&nbsp;by Koch Minerals &amp; Trading, LLC (KM&amp;T) to help finance Phase 1 of its lithium project.

WTR-CMI WEEKLY PERFORMANCE

Ag-Tech and Bio-Ag
September USDA report acknowledges reality.&nbsp;We recently highlighted the disconnect between the August USDA Crop Production Report and the boots-on-the-ground crop tour that implied much lower commodity grain expectations. Last week, the USDA released its&nbsp;September report, which reflected the crop tour’s findings and lowered its outlook for soybean and corn production by lowering the three main components:&nbsp;planted acre, harvested acres, and yield per acre. Weather pressures and challenges securing sufficient and timely quantities of fertilizers and pesticides may have been behind the reduction in productivity expectations for US farmers reflected in the report. Lower expected Brazilian crop and what appears to be lower-than-anticipated US production are likely to result in stable, if not higher, commodity crop prices, which would go a long way in helping US farmers deal with still-elevated input costs in the 2022-23 season. Also mitigating lower production is&nbsp;lower demand from industrial end markets, such as ethanol and biofuels, which are slowing due to the overall slowdown in the US economy and miles driven.
Farmers remain cautious.&nbsp;Creighton University’s Rural Mainstreet Index&nbsp;(RMI) reading for September improved somewhat from August’s reading of 44 to 46.3, marking the fifth straight month of readings under 50, with 50 being a growth-neutral outlook, signaling that US farmers are bracing for another difficult year and a downturn in economic activity. Supply chain disruptions and inflationary pressures for everything from inputs to fuel to equipment to land values continue to weigh on farmers’ minds. Farmers and bankers are now also bracing for escalating interest rates, even higher farm input costs, and drought. Higher expected crop values as mentioned above may help mitigate some of the cost pressures farmers will be facing, but high energy and natural gas costs constraining fertilizer and pesticide production and leading to their higher costs and still-snarled logistics may result in even greater scarcity of needed inputs, suggesting ag-chem companies such as CTVA, FMC, and AVD, as well as CF and MOS may continue to enjoy strong demand. It may also provide opportunities for companies offering different technologies, such as bio-based pesticides, seed treatment, and soil conditioning to expand their geographic and crop reach, as farmers look for every advantage and avenue to facilitate their production. This would be a positive for emerging bio-ag companies such as BIX and BHIL.
Battery and Energy Technology
EV growth spurs demand and drives higher metal prices.&nbsp;As EV growth continues to accelerate, supply of metals required to build EV batteries is barely keeping pace, driving metal prices higher as a result,&nbsp;with lithium carbonate prices in China&nbsp;setting a new record at just over $71/kg. Nor is lithium an exception. Brazilian mining company&nbsp;Vale expects nickel demand&nbsp;to surge 44% by 2030 from current levels, with most new supply coming from Indonesia, Canada, and Australia. The company also expects there to be a structural deficit of the metal even when factoring in current announced production and mining expansions. An emerging player with the potential to become the second-largest nickel supplier in the world in the mid-term and the largest in the longer term is a Canadian late-stage development company&nbsp;The Metals Company&nbsp;(NASDAQ: TMC), which is getting ready to commercialize undersea collection and processing of polymetallic nodules found in ocean depths between Mexico and Hawaii.
Working at cross purposes.&nbsp;We recently wrote about the disconnect between national governments’ efforts to expand and domesticate the sourcing and production of materials critical in enabling the EV and energy storage transformation on the one hand and local government agencies and NGOs doing their best to push “not in my back yard” agenda when it comes to mines, processing plants, and other facilities needed to support green energy goals. We previously highlighted the issues PLL is having in securing the permits needed to begin mining and processing lithium in North Carolina. Another development-stage lithium player running into similar NGO obstacles is LAC, which is facing strong opposition to its&nbsp;Nevada mine development from environmental groups and other NGOs. While Tesla CEO thinks mining is “relatively easy” compared with lithium refining competencies and is exploring&nbsp;Tesla getting into the lithium processing business, the fact remains that additional sources of lithium, whether by direct lithium extraction from brine à la CMP and LAC, spodumene mines, or expansion of brine extraction in the Andes, are sorely needed to decouple our dependence on China and other geopolitically sensitive neighborhoods. That means governments will need to rethink their approach to incentivizing domestic development of mine and processing plant resources.
Chemicals and Materials News
N.I.M.B.Y.&nbsp;Everyone wants a more sustainable world. Everyone wants less plastic and other pollution. But it seems nobody wants plants and facilities that can deliver on those wants in their neighborhood—Not in My Back Yard syndrome—at least not in developed countries with a strong NGO ecosystem. The problem goes beyond permitting new mineral and metal mines, processing plants, or refineries. Even scrap plastic sorting facilities are frowned upon. Just ask PureCycle Technologies’ (NASDAQ: PCT) CEO Dustin Olson, who has received a&nbsp;letter signed by 50 different NGOs&nbsp;requesting the company abandon its plans for a new plastic sorting facility in Florida.
Rating and Price Target Changes
ASH –&nbsp;Credit Suisse initiated coverage of the stock with an Outperform rating and $210 price target (PT).
CTVA –&nbsp;KeyBanc raised its PT to $72 from $64 and reiterated its Overweight rating; BMO raised its PT to $72 from $66 and reiterated its Outperform rating; JP Morgan raised its PT to $65 from $63 and reiterated its Outperform rating; Jefferies raised its PT to $77 from $70 and reiterated its Buy recommendation; Deutsche Bank raised its PT to $75 from $68 and reiterated its Buy recommendation.
EMN –&nbsp;Jefferies lowered its PT to $94 from $97 and maintained its Hold rating; Tudor Pickering lowered its PT to $98 from $105 and maintained its Hold rating; Stifel Nicolaus lowered its PT to $112 from $134 and reiterated its Buy recommendation; CFRA lowered its PT to $110 rom $115 and reiterated its Buy rating; Wells Fargo downgraded the stock to Equal Weight from Overweight and lowered its PT to $95 from $110; KeyBanc lowered its PT to $111 from $125 and reiterated its Overweight rating; Citigroup lowered its PT to $93 from $102 and maintained its Neutral rating; RBC lowered its PT to $82 from $97 and maintained its Sector Perform rating; Deutsche Bank lowered its PT to $95 from $115 and reiterated its Buy recommendation.
LTHM –&nbsp;Vertical Research downgraded the stock to Hold from Buy, despite raising its PT to $35 from $33.
PPG –&nbsp;Wells Fargo lowered its PT to $130 from $135 and maintained its Equal Weight rating.
SHW –&nbsp;Evercore ISI lowered its PT to $260 from $285 and reiterated its Outperform rating.
Recent WTR Publications and Upcoming Events
Management Series Report – Loop Industries Founder and CEO Daniel Solomita (NASDAQ: LOOP)
Management Series Report and 2Q22 Update for Westwater Resources (NYSE: WWR)
Initiation of Coverage – Westwater Resources (NYSE: WWR)
DISCLOSURES

Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  Dmitry Silversteyn, who is the writer of this report, covers the BioEconomy and Chemicals &amp; Materials Technology sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.  The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

Mat-Chem Notes for the Week Ended September 18, 2022

KEY HIGHLIGHTS


WTR-CMI last week.&nbsp;Our WTR-CMI index of 30 chemicals and materials technology stocks couldn’t keep up with the broader market last week, slipping 0.4% versus the prior week, while the S&amp;P 500 posted a 0.4% appreciation and the Russell 2000 rallied 1.9% for the week. Strong 2Q22 results and a strong outlook drove KWR stock up 15.3% and contributed to MTRN’s 8.6% appreciation, with LAC’s 7.7% improvement rounding out the top performers for the week. ECVT’s larger&nbsp;secondary offering priced at $8.75&nbsp;resulted in a 12.9% pullback for the stock, while VVV declined 11% despite announcing the&nbsp;sale of its Global Products business to Aramco, as investors remained concerned about margin pressures and longer-term prospects for a company still largely focused on ICE vehicle maintenance. EAF’s (9.6%) weekly performance also came courtesy of the outlook it provided on its 2Q22 earnings call, which highlighted slowing steel production and elevated costs.
Economic anxiety growing.&nbsp;Concerns over the&nbsp;impact of reduced gas supply from Russia&nbsp;and its impact on industrial production in the country were recently voiced as a reason for the cautious outlook for the balance of 2022 and into 2023, according to Covestro Germany. In yet another sign of a growing economic slowdown, domestic&nbsp;organic produce volumes declined 2.8%&nbsp;Y/Y in 2Q22, as prices went up 6.7%, indicating that consumers are becoming more price conscious as inflationary pressures heat up. This would not be good news for consumer-centric companies such as SHW, PPG, RPM, and VVV, as customer trade-downs may add mix pressures to the volume and FX headwinds.
Chip crunch prompts greater OEM involvement.&nbsp;As the chip shortage for the automotive industry&nbsp;continues to take a bite out of global production, OEMs are being looked to as reliable funding partners for future semiconductor fabs, as&nbsp;chip manufacturers look to offload some of the funding burden&nbsp;onto the ultimate customer in order to ensure the situation does not repeat once the current crunch is over,&nbsp;sometime in 2023.
LTHM gets prepayment from GM.&nbsp;In the last issue, we highlighted GM’s supply agreement with LTHM and last week we learned that the&nbsp;auto OEM is prepaying LTHM $198 million&nbsp;to ensure a six-year contractual supply—another indication of growing material availability concerns in the EV industry.

WTR-CMI WEEKLY PERFORMANCE


Source: YCharts; August 5 close

Ag-Tech and Bio-Ag
Farmland acres grow globally but shrink in the US.&nbsp;According to a recent article,&nbsp;global farm acreage has increased&nbsp;in 2000’s after the flattish 1980-2000 period, with most of the growth coming from LATAM, India, and former CIS regions, with oilseed crops, particularly soybeans, accounting for most of the increase. Conversely,&nbsp;domestic farm acres shrank&nbsp;over the past two decades, as succession decisions and urban and suburban development are removing 2,000 acres per day from domestic farming and grazing lands. We mentioned this trend in our previous reports and see this as a driver of adoption of newer ag technologies, including precision farming, seed treatment, and bio-based pesticide and fertilizer alternatives, which are all designed to improve yields and minimize environmental impact in order to produce more without needing more farmland. Companies such as BHIL and BIOX, as well as FMC, CTVA, and AVD, stand to benefit as use of inputs/acre grows, with BIOX and FMC being particularly well positioned given their strong LATAM presence and FMC’s over-representation in soybean and rapeseed markets.
As concerns over food scarcity grow, government regulators turn a deaf ear.&nbsp;While the Ukraine/Russia agreement that allowed exports of Ukrainian grain to resume is encouraging, concerns are rising over the 2022-23 Ukrainian crop season.&nbsp;According to the USDA, Ukrainian production of sunflower seeds is expected to decline 37% versus this year, with Ukraine being the number one producer of sunflower seeds. The report also predicts a 35% Y/Y decline in wheat production in the 2022-23 season (Ukraine is the ninth-largest wheat producer in the world) and a whopping 54% drop in the country’s corn production (Ukraine is the sixth-largest corn producer in the world). And that’s if the war’s impact on Ukraine’s farming heartland doesn’t get worse! As a major exporter of grain and ag products, Ukraine’s limited ability to export foodstuff this year and uncertainty over supply next season is raising concerns among major importing regions such as India, Africa, and Asia as to their ability to provide sufficient food for their populace.
It would seem that in this environment, governments would be doing all they could to ensure the adequate supply of ag products to the global market, or at least their own. However, that may not be the case. As we highlighted in the last issue, Netherlands regulators are putting environmental regulations in place that would raise the cost (if not make it outright impossible) for smaller Dutch farmers to continue to produce, which has led to widespread farmer demonstrations across the country. Holland may not be alone in this drive to reduce farming’s impact on the environment at any cost. Its example&nbsp;may be followed by Canada and Ireland&nbsp;and there is concern that similar environmental rules, which seem to be specifically aimed at farming, may come to the US, given the green agenda of the current administration. Tone deaf does not begin to describe these initiatives and efforts, in our opinion.
Automotive &amp; Transportation
July picks up where June left off.&nbsp;The top three economies in Europe are reporting another Y/Y decline in July new car registrations.&nbsp;Germany saw a 13% drop, while&nbsp;the UK posted a slightly less onerous 9% Y/Y&nbsp;decline in new car registrations last month.&nbsp;French registrations&nbsp;also declined, but at a slightly slower 7% pace. And while the impact of chip shortages is waning on a Y/Y basis as we mentioned previously and the Y/Y declines in registrations may also show better comps in 2H22, a recovery in demand still lies beyond the line of sight, as new obstacles replace the old concerns. Gas rationing in Europe due to Russia’s influence over gas supply to the region, higher model prices as OEMs work to preserve margins in&nbsp;a rising cost environment, and slowing the economy’s impact on consumer confidence&nbsp;are likely to continue to weigh on auto production and sales well into 2023. BMW for example, while looking for a recovery in 2H22, had to reduce its full-year 2022 outlook&nbsp;given the slower 1H22 and uncertainty and volatility of economic and geopolitical factors that make more optimistic predictions difficult at this time.
We continue to see risk for companies in our index with high exposure to the automotive and transportation sectors, including PPG, AXTA, and to a lesser extent, AVNT, FUL, and HXL.
Battery Materials &amp; EV Transformation
Technology, methods, and supply chain continue to evolve.&nbsp;Global&nbsp;automotive manufacturers and their suppliers are looking to invest half a trillion dollars&nbsp;over the next several years in order to prepare the industry to transition to an EV architecture more fully. The investments range from new EV factories, battery cell and battery plants, new and expanded mining and conversion plant infrastructure for critical materials, and the growing realization of the need to reduce the industry’s dependence on China as the primary source EV-related supply. The recent&nbsp;decision by CATL to delay&nbsp;finalizing its plans for a North American battery plant underscores those concerns. It can therefore be seen as a sign of desperate times that&nbsp;Tesla felt it necessary to sign supply agreements with two Chinese cobalt processors&nbsp;in an effort to ensure it has adequate access to that important battery metal. Can one blame it given&nbsp;the outlook for cobalt?
Looking high and low for critical materials.&nbsp;Almost every long-term projection of EV growth and corresponding growth in critical metals needed for EV batteries includes a widening disparity between expected demand and available, highly probable, and even somewhat probable supply for most of these materials—lithium first and foremost. It is not surprising then that both auto OEMs and battery companies are looking to sign supply deals with existing and even speculative suppliers. Case in point is the recent announcement of a&nbsp;supply agreement between Prime Planet Energy &amp; Solutions, the battery joint venture of Toyota and Panasonic, and Ioneer Ltd.&nbsp;(OTC: GSCCF), a development-stage company whose lithium production plant isn’t expected to commence construction until 4Q22, with an uncertain timeline to commercial production. Another source of critical materials for batteries is end-of-life EV batteries themselves. In the spirit of environmental responsibility and a circular economy,&nbsp;Ascend Elements has announced plans to invest up to $1 billion&nbsp;in a factory in Kentucky for the production of battery cathode materials for EVs. The plant will use black mass from recycled batteries to directly produce cathode materials for the EV market. Production is scheduled to start at the end of 2023, with capacity to produce enough cathode materials for 250,000 EVs annually. Similarly, British battery developer&nbsp;Nexeon secured more than $200 million in funding&nbsp;to develop its battery materials manufacturing operations for the production of silicone-based anode materials for EV batteries, showing that it’s not just the cathode-side metals, such as lithium and cobalt, that are subject to supply concerns and therefore provide opportunities for funding and growth. We also note that one of the companies in our WTR-CMI index, namely&nbsp;NGVT, took part in this round of funding&nbsp;for Nexeon.
Graphite market update.&nbsp;Speaking of anode materials, an often overlooked part of an EV battery is the graphite that goes into the battery anode. As with other critical battery materials, a severe shortage of supply versus projected demand is envisioned for the graphite market. However, until now, this pending imbalance appears to be getting little attention from investors. As the realization that the EV industry is 100% dependent on China for&nbsp;battery-grade graphite spreads, we believe this lack of attention will be addressed. One company that is looking to launch domestic production of battery-grade graphite materials is Westwater Resources (NYSE: WWR). We recently hosted a fireside chat with WWR management to discuss this apparent lack of investor understanding of the supply-demand imbalance and overreliance on China (see link below). The company will update investors on its progress Thursday, August 11 at 11:00 am EDT when management will host its 2Q22 call.
Chemicals and Materials Technology in the News
NGVT.&nbsp;In addition to making an aforementioned investment in Nexeon, the company also announced the&nbsp;acquisition of privately owned Ozark Materials, LLC and Ozark Logistics, LLC (“Ozark Materials”)&nbsp;for $325 million. The acquisition is expected to close by early 4Q22. The acquired business is on pace for annual revenues of approximately $150 million, with a ~20% EBITDA margin in FY23.
MTRN.&nbsp;The company announced that it has established a new facility in Milwaukee, Wisconsin to accelerate the growth of advanced chemical solutions for the semiconductor and EV battery markets. The new 150,000-square-foot facility expands the company’s capacity to produce Atomic Layer Deposition (ALD) materials for the most sophisticated semiconductor chips and provide advanced chemicals for the development of next-generation battery technology for EVs.
Circular Economy.&nbsp;Green Dot Bioplastics, a developer and supplier of bioplastic materials for innovative, sustainable end-uses,&nbsp;announced an addition of nine new grades of bioplastics&nbsp;aimed at single-use and plastic packaging markets, as the industry looks to adjust to increasingly strict government mandates and regulations related to single-use plastics. In an effort to support similar conversions, in this case to post-consumer recycled plastics,&nbsp;AVNT announced its post-consumer recycled (PCR) Color Prediction Service&nbsp;for polyolefins and polyethylene terephthalate (PET) resins as well as its new polyolefin antioxidants, Cesa Nox A4R Additives for recycled plastics, thereby lowering adoption obstacles for consumers looking to incorporate post-consumer recycled plastic into their product designs.
EAF.&nbsp;While GrafTech’s 2Q22 results and guidance for the balance of 2022 left analysts and investors unimpressed with the company’s near-term margin and volume headwinds, investors may be missing the longer-term prospects for the company as its graphite electrodes going into electric ark furnaces (EAF) are enabling a transition from high carbon-producing coal furnaces to less environmentally impactful EAF technologies, which also use steel scrap, rather than iron ore, as a raw material.&nbsp;A recent study confirming the lower carbon-generating benefits of EAF&nbsp;versus conventional smelters underscores the environmental tailwind investors may be missing in evaluating EAF’s current volume issues in an environment of declining steel production globally.
Rating and Price Target Changes
ALB –&nbsp;UBS raised its price target (PT) to $265 from $218 but maintained its Neutral rating; Oppenheimer raised its PT to $440 from $368 and reiterated its Outperform rating.
CTVA –&nbsp;Credit Suisse raised its PT to $72 from $68 and reiterated its Outperform rating; UBS raised its PT to $66 from $64 and reiterated its Buy recommendation; CFRA lowered its PT to $61 from $65 and maintained its Hold rating.
EMN –&nbsp;CFRA reiterated its Buy rating and $125 PT; Citigroup downgraded the stock to Neutral from Buy; KeyBank raised its PT to $125 from $124 and reiterated its Overweight rating; Deutsche Bank lowered its PT to $115 from $125 and reiterated its Buy rating; Stifel Nicolaus lowered its PT to $134 from $155 and reiterated its Buy rating; Barclays lowered its PT to $110 from $120 and maintained its Equal Weight rating; Wells Fargo lowered its PT to $110 from $115 and reiterated its Overweight rating; RBC raised its PT to $97 from $94 and maintained its Sector Perform rating.
FMC –&nbsp;Credit Suisse lowered its PT to $105 from $109 and reiterated its Underperform rating; CFRA lowered its PT to $120 from $126 and maintained its Hold rating; Mizuho Securities lowered its PT to $144 from $149 and reiterated its Buy rating.
FUL –&nbsp;Berenberg Bank lowered its PT to $82 from $85 and reiterated its Buy recommendation.
HXL –&nbsp;BMO raised its PT to $66 from $57 and maintained its Market Perform rating.
LTHM –&nbsp;CFRA lowered its PT to $28 from $36 and reiterated its Buy rating; Mizuho Securities lowered its PT to $30 from $34 and maintained its Neutral rating; Deutsche Bank raised its PT to $26 from $24 and maintained its Hold rating.
VVV –&nbsp;CFRA downgraded the stock to Hold from Buy and maintained its $34 PT.
Recent WTR Publications and Upcoming Events
Fireside Chat with Management of Westwater Resources, Inc.
Initiation of Coverage – Westwater Resources, Inc.
Management Series Report – Marrone Bio Innovations Inc. CEO Kevin Helash
Management Series Report – Westwater Resources, Inc. Executive Chairman Terence Cryan and CAO Steven Cates
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Mat-Chem Notes for the Week Ended August 7, 2022

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