EMS-Chemie (SIX:EMSN) was upgraded to “buy” from “neutral” rating by UBS, with the brokerage citing improved visibility on earnings and a more favorable risk-reward profile following recent share price weakness, sending the stock up over 7% on Wednesday.

UBS raised its rating while maintaining a cautious tone on the broader demand environment, pointing instead to company-specific factors supporting the upgrade. 

The analysts said EMS-Chemie’s margin resilience and cost discipline have held up better than expected, even as volumes remained under pressure in key end markets. 

UBS noted that the company continues to benefit from a high share of specialty polymers, which provide pricing stability relative to more commoditized segments.

The report said UBS expects operating margins to remain structurally higher than peers, supported by EMS-Chemie’s focus on high-performance materials and a limited exposure to price-led competition. UBS highlighted that recent cost inflation has moderated, easing pressure on profitability compared with earlier periods.

UBS also pointed to valuation as a key driver of the upgrade. The brokerage said the stock’s recent underperformance has brought valuation metrics to levels that better reflect current earnings risks. UBS described the current valuation as more balanced relative to the company’s long-term returns and cash generation profile.

While UBS did not signal a near-term demand rebound, it said EMS-Chemie’s balance sheet strength and consistent free cash flow generation provide downside protection. 

The analysts added that the company’s conservative capital allocation and limited acquisition activity reduce financial risk during periods of weak industrial demand.

UBS reiterated that visibility on volume recovery remains limited, but said the upgrade reflects confidence in EMS-Chemie’s ability to sustain earnings and margins through the cycle rather than expectations of a sharp improvement in end-market demand.