TLDR
- Solvay (SOLB) stock gained 2.9% to reach €26.50 following Deutsche Bank’s upgrade from Sell to Hold
- Analyst Tristan Lamotte from Deutsche Bank increased the price target from €23.50 to €26
- The company’s rare earth operations could potentially boost EBITDA by €100 million, representing a 13% increase
- A non-binding agreement was signed between Solvay and Viridis Mining to acquire rare earth materials from Brazilian sources
- Key concerns remain including possible guidance revisions, challenging soda ash conditions, and constrained cash flow generation
Shares of Solvay advanced 2.9% to €26.50 during Thursday’s trading session, propelled by Deutsche Bank’s rating revision and heightened market attention toward the company’s rare earth operations.
Tristan Lamotte, covering the Belgian specialty chemicals company for Deutsche Bank, revised his stance to Hold from the previous Sell recommendation, while simultaneously lifting the target price to €26 from €23.50. This adjustment followed Solvay’s 10% underperformance relative to the SX4P European chemicals benchmark since the firm’s November 2025 downgrade, creating what the bank views as a more reasonable entry point.
The shares are currently valued at 7.5 times projected 2026 EV/EBITDA. While this represents a premium versus comparable companies, Deutsche Bank now believes this valuation multiple is warranted when factoring in the rare earth opportunity.
According to Deutsche Bank’s analysis, the market has failed to properly account for Solvay’s rare earth processing infrastructure. The firm projects this segment could contribute an additional €100 million to EBITDA initially, representing approximately 13% upside. Should the rare earth initiative prove successful, further stock appreciation could follow.
Brazilian Supply Agreement Strengthens Strategic Position
Earlier in the month, Solvay announced a non-binding letter of intent with Viridis Mining and Minerals to establish a supply arrangement for rare earth feedstock originating from Brazil. These materials would be processed at Solvay’s La Rochelle separation facility in France, with full-scale commercial operations expected to commence in 2028.
“This proposed transaction would mark a milestone in strengthening and diversifying our upstream supply chain,” said An Nuyttens, President of Solvay’s Special Chem business.
The company has established an ambitious objective to capture 30% of European demand for magnet-grade light and heavy rare earth elements by decade’s end. The Viridis partnership represents a strategic move to develop supply channels independent of Chinese sources.
Significant Headwinds Persist
While upgrading the stock, Deutsche Bank maintains a cautious stance rather than recommending purchase. The investment bank identified multiple risk factors that continue to challenge the business model.
Potential downward revisions to financial guidance remain a concern. The soda ash segment faces ongoing market pressure. Construction-related end markets show persistent weakness. Additionally, the company’s free cash flow generation remains constrained.
The rating enhancement primarily reflects improved risk-reward dynamics following recent underperformance rather than fundamental improvement in Solvay’s core business segments.
Lamotte observed that while the SX4P index appreciated 10% since the November 2025 downgrade, Solvay shares declined from €27.80 to the current €26.50 level during the same timeframe.
Deutsche Bank’s revised €26 price objective remains marginally below current market levels, reinforcing the neutral investment stance.
The rare earth supply arrangement with Viridis Mining carries no binding obligations at present, and commercial production at the La Rochelle facility remains approximately two years from realization.
