“It is clear that the agrochemical sector experienced strong demand.”
Deutsche Bank has raised its target price for IDB Holding Corp. Ltd. (TASE:IDBH) subsidiary Makhteshim Agan Industries Ltd. (TASE: MAIN) to NIS 34 in an effort to stay ahead of the share’s market price, currently at NIS 30. The new target price gives a premium of 13%.
Makhteshim Agan is due to publish its financial report for the first quarter of 2007 next Thursday. Deutsche Bank says, “Now that its larger competitors have all reported quarterly results, it is clear that the agrochemical sector experienced strong demand aided by mild weather in the Northern hemisphere and higher soybean prices that positively impacted demand in Brazil and Argentina. We expect Makhteshim Agan to grow faster than the sector, and with cost cutting to have a relatively rapid impact on EBITDA, we maintain our ‘Buy’ rating.”
The investment bank adds, “We expect Makhteshim Agan to report a 9% year-on-year increase in first quarter revenues to $540 million, though would not be surprised to see growth at the high-end of the agrochemicals sector. We view gross margin as the most important parameter in first quarter results given the ongoing decline from a peak of 40% in first quarter of 2005 to a low of 32% in fourth quarter of 2006. We expect margins to recover to 34.5%, though still remain below the 36% recorded in first quarter of 2006 due mainly to the oil price differential year-on-year. A higher margin would have a positive impact on our 2007 forecasts. We are forecasting flat year-on-year EBITDA of $96 million and net income of $51 million compared with $58 million in first quarter of 2006, with the difference due mainly to an unusually low tax rate of 10% last year. We have increased 2007 and 2008 EBITDA to $350 million and $424 million, respectively to reflect the improved market outlook.”
Published by Globes [online], Israel business news - www.globes.co.il - on May 3, 2007
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