40% of DuPont’s Stock Driven by Performance and Safety Materials

-17.98%
Downside
76.67
Market
62.89
Trefis
DD: DuPont logo
DD
DuPont

DuPont (NYSE:DD) is a diversified global chemical company, which supplies agricultural products (such as seeds and pesticides), high-performance materials, automotive coatings, electronic materials and key industrial chemicals to industries and consumers globally. DuPont competes with other major chemical & agricultural companies such as Dow Chemicals (NYSE: DOW), 3M (NYSE:MMM), Monsanto (NYSE:MON), Syngenta and BASF.

Our current price estimate for DuPont stands at $58.10. The firm derived a bulk of its value from the performance and safety materials division constituting 40% of the our price estimate, which we discuss below.

40% of DuPont’s in Performance and Safety Materials

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The Performance and Safety Materials divisions supplies high-performance chemicals/materials that cater to a wide range of industries.

Key products include:

1. Performance Polymers: Delivers a broad range of polymer-based high performance materials, including elastomers and engineering polymers.

2. Packaging and Industrial Polymers: Includes resins, films, sealants & adhesives.

3. Protection Products/Technologies: Includes body armor, protective gear for the military and construction chemicals.

4. Other Chemicals: Includes DuPont’s Titanium Technologies, fluorochemicals and other specialty chemicals such as refrigerants, lubricants and solvents.

Key Drivers: Growing Division Market Share and a Large Global Market

The performance and safety materials division falls under the global specialty chemicals market (excluding electronic chemicals). Due to the vast array of products and their applications, the global demand (in real US dollar terms) for specialty chemicals was worth over $445 billion in 2010, and we expect it to reach roughly $570 billion by the end of the Trefis forecast period.

Revenues from this division account for almost 50% of the company’s total revenues (about $15 billion in 2010) and led to a 3.5% market share in 2010. With global macro-economic conditions recovering from 2008-09, we expect additional capacity expansions by DuPont in high-growth markets such as China. Additional factors such as brand recognition of DuPont’s key products (e.g. Teflon, Zytel, Kevlar) should propel market share growth in future years, which is estimated to reach close to 4% by the end of the Trefis forecast period.

See our full analysis of DuPont’s price estimate