The possibility of a Ukraine ceasefire leading to lower energy costs is one the factors behind the current bullish case around European stocks, but any positive impact is unlikely to be felt evenly across sectors in the energy-importing region.

Goldman Sachs reckons chemicals are among those that could be in for a boost should Russian gas flows be restored.

The bank expects a return of Russian natural gas to Europe would help catalyze further outperformance in European chemicals, despite the structural challenges posed by China’s overcapacity.

“Applying our lower energy cost scenario, would drive a 10-20% uplift to mid-cycle EBITDA estimates for the sector,” it writes in a research note this week.

“We would also see scope for 10-15% multiple expansion if the contraction that took place amid the European energy crisis were to reverse and return to 1H21 levels.”

GS views BASF BAS, Germany’s top chemical maker, as the best proxy of Russian gas restoration. The stock is up 11% YTD.
Source: Reuters