Merrill Lynch has upgraded its recommendation for generic agrochemicals company MA Industries (Makhteshim Agan) (TASE: MAIN) to "Buy". Analyst Haim Israel sets a NIS 29.50 price objective for the stock, which is currently traded on the Tel Aviv Stock Exchange at NIS 25.42.
"Since mid-May 2006, MAIN has underperformed the MSCI EM index by 22% and the MSCI IL by 6% (absolute return of -7%). However, cyclical companies should be bought at the bottom of the cycle, not when the outlook is rosy, and 2007 is set to be a year of transition," Israel writes.
"In addition to greater clarity on new management and its commitment to restructuring, we think we are close to the bottom of the cycle and see signs of stability in the plant protection market, which should lead to better farming income in key countries.
"We believe that the company will be keen to ‘clear the decks’ after the fourh quarter numbers (to be released in mid-March 2007) and it is a good time to do so, in our view. Gross margins are expected to fall to 33% and the strength of the shekel against the US$ is expected to have shaved $2.5 million off the EBIT line."
Published by Globes [online], Israel business news - www.globes.co.il - on January 4, 2007
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