Page 178 - CW E-Magazine (17-12-2024)

Special Report

The Rising Importance of a TSR Strategy

In recent years, demand for a TSR business, financial, and investor strate- growth’s role as the key TSR
strategy – both as a standalone approach gies – to TSR outcomes. As a result, driver).
and as part of broader corporate strate- companies can focus on those actions * circular, bio-based, and net-zero
gies – has increased. Industry leaders that drive strong, sustainable TSR and initiatives.
and shareholders are prioritizing increase shareholder value. * using industry best practices to
medium – and long-term plans that achieve R&D and commercial
clearly articulate TSR potential and Strategies that can successfully excellence.
outline the value creation impacts of enhance TSR include: * process optimization by means
different actions. At BCG, we help * portfolio realignments that refocus of digital technologies and
companies to connect levers – across the business and drive growth (given zero-based budgeting.

BCG’s Approach to TSR Strategy

5
Recommended path forward
TSR strategy roadmap

4 TSR simulation and assessment • Overall: Corporate level (history/plans)
(TSR, P/E, share price, market cap): • Portfolio X-ray: Lines of business and/or geographies (history/plans)
• Integrated TSR strategy scenarios and “wheels” (e.g., growth vs. margin,
acquisitions, divestitures, financial policy options)

1 2 3
Key drivers of differences Investor insights Financial policy optimization
in valuation multiples (interviews and “natural and free cash flow
investor type”) pressure testing

Leveraging BCG's TSR research, insights, experts, and proprietary toolkit

Source: BCG.

On a regional level, emerging markets When we looked at the correlation tions about South Korea’s position in
(boosted by South Asia) and China were between companies’ TSR and how they future-oriented areas, such as electronics
the top performers in terms of revenue performed on environmental, social, and batteries, led to a strong expansion
growth. (See Exhibit 5.) At the same and governance (ESG) criteria, we in valuation multiples which drove TSR
time, EBITDA margins shrank across all found there was a particularly strong performance. (See Exhibit 6.)
regions. Among our five sectors, margin correlation between high TSR and good
declines particularly impacted multispe- corporate governance – underlining its Unlike most regions, which suf-
cialty players. However, the industrial importance to investors. fered margin declines during the period
gases, mining and oilfield, and pharma 2019 – 2023, South Asia, led by India,
ingredients subsectors benefited from South Korea was an especially sig- was one of only a few with stable mar-
strong margins. Multiple expansion – nificant outlier. On a regional level, its gins. The region is consistently ahead
reflecting positive market sentiment chemical companies delivered the sec- of its peer group in terms of TSR and
about companies’ future prospects – ond-highest TSR after South Asia. How- revenue expansion, helped by generous
was another important driver of TSR ever, the average EBITDA margin in the industrial policy support from federal
performance, both in emerging markets South Korean chemical industry in 2023 and state governments, a large and
and particularly South Korea, but also in was by far the lowest across all regions. increasing population, and a growing
focused specialties. Despite this, positive investor expecta- middle class. Such divergence between

178 Chemical Weekly December 17, 2024

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