Merrill Lynch has published an updated review on Makhteshim Agan Industries Ltd. (TASE: MAIN), in which it rated it "Buy" and set a target price of NIS 36, slightly higher than the company's current market price of around NIS 34.
" Recent trends are having conflicting effects on Makhteshim," says Merrill Lynch. "While the shift in the US from soy to corn (93 million acres planted according to the last USDA report, up 19% year-on-year), should continue to benefit Makhteshim, due to its balanced exposure to soy and corn, the unbalanced sales in Brazil (biased towards soy) should push sales down. More problematic for Makhteshim is that, according to the same source, 73% of planted corn acres are currently genetically modified, versus 61% last year. Top-line numbers should eventually stabilize due to higher Glyphosate sales, for which prices increased recently, but margins will remain under pressure."
Merrill Lynch retains a cautious but generally optimistic outlook for Makhteshim. "Overall, we believe that the fundamentals remain extremely supportive for Makhteshim Agan. However, market trends should be in focus in the short term. Trends in the US and Brazil are having conflicting effects on the company. We expect US sales to remain under pressure until year-end. We forecast single-digit sales growth, with bottom-line growth of a similar pace, due to pressure on margins"
As for Makhteshim's coming quarters, Merrill Lynch says, "We expect decent quarterly results, which will be affected by very strong sales growth in Europe but less of an impact from the US. The Brazilian season will kick off in August. Again, we are putting cash generation and working cash investments at the top of our priority list. Overall, we expect the company’s sales to surge by 13% year-on-year, reaching $508 million, mainly driven by a 16% jump in crop protection sales, favorable euro/dollar trends, and robust sales in Europe."
Published by Globes [online], Israel business news - www.globes.co.il - on July 26, 2007
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