Merrill Lynch has downgraded Makhteshim Agan Industries Ltd. (TASE: MAIN) to "Neutral" from "Buy" and cut the target price from NIS 37 to NIS 32.50, 7% above the company's current share price. Makhteshim fell 3.4% by midday today.
Merrill Lynch is also cutting its 2007 and 2008 forecasts for Makhteshim. The 2007 net profit forecast has been cut to $179 million from $199 million and the 2008 net profit forecast has been cut 10% to $218 million.
Merrill Lynch says, "As we see it, Makhteshim’s profit warning for the fourth quarter of 2007 was indicative to 2008 and is linked to the following: a shift in the business mix towards Roundup (a “Jaws effect”); a spike in raw material prices that preceded by some six months any compensating increase in selling prices (inflated when factoring in foreign exchange and “in-sourcing” back from China); and a generic price follower disadvantage."
Merrill Lynch says that while it is bullish on the agricultural chemicals industry, Makhteshim lags its peers in profit per share, share momentum and other factors. "Although management is working very hard to correct past mistakes, we believe that margins will continue to be under pressure for the reasons cited and that this will not enable for Makhteshim to outperform the industry’s performance."
Not everyone is so downbeat. Yesterday, Deutsche Bank reiterated its "Buy" recommendation for Makhteshim with a target price of NIS 37.
Published by Globes [online], Israel business news - www.globes-online.com - on January 15, 2008
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