Braskem's Strategic Turnaround: A Catalyst for Growth in Latin American Petrochemicals

The Brazilian petrochemical giant Braskem stands at a pivotal crossroads, as billionaire investor Nelson Tanure's bid to acquire its controlling stake underscores a broader opportunity in Latin America's industrial sector. With its undervalued shares, operational turnaround, and strategic pivot toward sustainability, Braskem exemplifies the potential for high-reward investments in a region often overlooked by global markets.

Valuation: A Discounted Gem in Recovery Mode

Braskem's market cap of $1.47 billion as of Q1 2025 represents a fraction of its revenue ($13.95 billion) and its potential. Its price-to-sales (P/S) ratio of just 0.1x—well below peers—hints at a mispriced asset. While its trailing P/E remains negative (-0.9x) due to past losses, the company's Q1 2025 EBITDA surged 121% sequentially to $224 million, signaling a clear rebound.

This turnaround is no accident. Braskem has slashed costs, boosted cash reserves to $2 billion, and extended debt maturities, with 68% now due post-2030. These moves position it to capitalize on rising global demand for petrochemicals, particularly in Asia and the U.S., where its low-cost feedstock (ethane and gas) gives it a competitive edge.

Stakeholder Dynamics: Tanure's Play for Control

Nelson Tanure's bid targets Novonor's 38.3% stake via NSP Investimentos, aiming to avoid a costly mandatory tender offer. His strategy hinges on Petrobras' cooperation—Brazil's state-owned oil giant holds 36.1% and preemptive rights. Petrobras' CEO has signaled support, stating, “We want a solution,” but negotiations with creditor banks (holding shares as collateral) remain unresolved.

The deal's success would unlock value for all parties. For Novonor, proceeds could repay $2.47 billion in debt; for Petrobras, expanded influence aligns with its energy transition goals; and for Tanure, control would allow restructuring and scaling Braskem's green initiatives.

Strategic Initiatives: Sustainability as a Growth Lever

Braskem's shift to bio-based polymers—its I'm green™ polyethylene now in its 15th year—positions it as a leader in decarbonization. Aiming for 1 million tons of bio-based production by 2030 and $600 million in EBITDA from its Thailand ethylene plant, Braskem is betting on circular economy trends. This aligns with global demand for sustainable materials, offering premium pricing and market share gains.

Risks and Mitigation: Navigating Liabilities and Markets

• Environmental Liabilities: While Alagoas provisions are 99.9% resolved, residual risks linger. Braskem's proactive remediation and community engagement aim to mitigate reputational damage.
• Commodity Volatility: Petrochemical margins depend on oil prices and spreads. Braskem's geographic diversification (Brazil, Mexico, Europe) and gas-based feedstock mitigate this risk.
• Stakeholder Gridlock: If talks with Petrobras or banks falter, the deal could stall. However, the exclusivity period and Tanure's track record suggest progress is likely.

Investment Outlook: Asymmetric Upside Ahead

Analysts project Braskem's stock could reach $13 per ADR (base case) or $25 (bull case) by 2026–2027—a 300–600% upside from Q2 2025 levels. Key catalysts include:
1. Q2 2025 Results: Expected to show further EBITDA growth and cost-saving progress.
2. Bid Resolution: A successful Tanure deal or alternative stake sale could unlock immediate value.
3. Petrochemical Recovery: Asia's infrastructure boom and U.S. shale gas advantages are boosting demand.

Conclusion: A Buy with a Long View

Braskem is a rare gem in Latin America's industrial sector—a company with a strategic pivot toward sustainability, operational discipline, and a valuation far below its intrinsic worth. Investors should take a position in Braskem ahead of its Q2 results and the Tanure bid resolution, aiming for a target price of $13. Risks are manageable, and the asymmetric upside makes this a compelling buy for those willing to bet on Brazil's industrial revival.

JR Research advises investors to monitor Braskem's stakeholder negotiations and Q2 results closely, as both will define its trajectory in the coming quarters.