Citi gives Israel Chemicals Ltd. (TASE: ICL) a "Buy/medium risk" recommendation with a target price of NIS 62 per share, compared with yesterday price of NIS 47. Both banks believe that the company has upside potential given rising potash and phosphate prices.
Merrill Lynch also gives Israel Chemicals a "Buy/medium risk" recommendation and has raised its target price to NIS 60 from NIS 54. The investment bank says that now is the belle epoque for fertilizers, with rising prices and demand.
Merrill Lynch has also raised its revenue and earnings per share forecasts for the company. It predicts that Israel Chemicals' revenue will grow 7% to $5.52 billion in 2008 and a further 9% to $6.1 billion in 2009, and that its earnings per share will rise by 8% in 2008 to $0.79 and by a further 13% to $0.91 in 2009.
Citi notes, "We recently met with Israel Chemicals CEO Akiva Mozes in order to gain a better understanding of two key variables for the company, one a one-off boost, the other long-term: the monetization of potash inventory; and the ramp-up of its phosphate rock production. We believe action will be taken shortly on both items given currently compelling prices."
Citi says that Israel Chemicals has 700,000 tons of surplus potash inventory, all produced and expensed in 2006. "We assume that 400,000 tons could be sold in 2008 and 300,000 tons in 2009 at our forecast average prices of $469 per ton and $562 per ton resulting in a total profit of $0.20 per share, split between 2008 and 2009." The company also has 1.5 million tons of potential phosphate rock production that could be brought online within months at minimal cost and sold at an average price of $197 per ton in 2008 and $215 per ton in 2009. The cash cost was $40 per ton.
Citi says that Israel Chemicals earn up to $1.24 per share in 2008 and $1.77 in 2009, boosting the share's fair value to NIS 70.
Published by Globes [online], Israel business news - www.globes-online.com - on March 18, 2008
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