In a new report on Israel Chemicals Ltd. (TASE: ICL) Citigroup Global Markets cites trade press, such as "FMB", as reporting that the company has signed potash contracts with Chinese importers for 2010. Citi believes that the price Israel Chemicals obtained is at least the $350 per ton obtained by Russian producer JSC Belarusian Potash Company (BPC).
Citi analysts Sophie Jourdier and Andrew Benson said, "It had been thought that Israel Chemicals may have been able to secure a higher price than BPC given the rising demand environment since the beginning of 2010. This does not appear to have been the case - and is likely to raise doubts that other exporters will be able to raise the price with the Chinese this year."
Citi reiterated its "Hold/high risk" recommendation for Israel Chemicals with a target price of NIS 50. The share rose 0.2% by midday today to NIS 51.80.
Citi said, "We believe consensus estimates of significant earnings per share growth in 2010 are too high for Israel Chemicals. Although demand will recover, this will be offset by lower potash prices which we expect to stabilize between $350-$400 per ton. In our view, Israel Chemicals' share price is justified by its structural low costs, expansion potential and supportive dividend policy, but we caution that the shares may come under short-term pressure as 2010 earnings per share estimates are reduced."
Published by Globes [online], Israel business news - www.globes-online.com - on January 20, 2010
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