UBS BB cuts Braskem target to R$ 3.75 and warns of 29% drop

UBS BB downgraded Braskem from neutral to sell on 16 September and cut its price target from R$ 10.50 to R$ 3.75. The target implies a 29.8% downside from the previous close. The bank highlighted the company's out-of-court restructuring process for roughly $10.9 billion in total debt.

Braskem shares plunged following the decision. By 13:05 Brasília time on Wednesday, the stock fell 13.67% to trade at R$ 4.61, after reaching an intraday low drop of 14.79%.

On 24 August, Braskem confirmed an extrajudicial recovery plan with 39.6% creditor adhesion, facing a 22 November deadline to secure support from 50% plus one of creditors. The plan includes extending maturities and capitalising interest during a relief grace period. UBS BB estimated that Braskem must cut net debt by $6.0 billion to $6.5 billion to reach sustainable leverage. Analysts warned that an equity conversion and capital increase could cause 70% to 95% dilution for minority shareholders. If no deal is reached, the company may file for judicial recovery. Petrobras would need to invest $2 billion to $2.5 billion to keep its current stake under such a recapitalisation.

The bank also warned that petrochemical spreads will face sustained pressure from Chinese additions. For 2027, global polyethylene capacity additions are projected at 7.6 million tonnes, about 60% from China, against demand growth of just 4.6 million tonnes. Polypropylene capacity is set to rise by 3.1 million tonnes, with roughly 75% from China. UBS BB models 2027 PE-naphtha spreads at $395 per tonne, down 13% year-on-year, PE-ethane at $823 per tonne, down 18%, and PP-propylene at $485 per tonne, down 9%.