Merrill Lynch is "upgrading its models" in valuing Israel Chemicals Ltd. (TASE: CHIM), and raising its price target for the firm to NIS 48 from NIS 39.
The investment bank sees current strong demand and tight supply of the commodities the firm produces. In fact, the firm points out that "Soaring potash prices have shown our estimates to be conservative." Therefore, Merrill notes, "we are increasing our 2008-09 potash prices by 18% to $300 per ton and our magnesium prices to $4,000 per ton (up 25%). We are also raising our European sales projections by 3% in 2008 and 4% in 2009 as a result of the suspension of the EU’s agricultural “set-aside” policy."
"Some 10% of EU agricultural land will come back into production in the next two years. Although we think that the change will be moderate, it will translate into higher demand for agro-inputs."
"Soaring potash prices have shown our estimates to be conservative. In south-east Asia and Brazil, potash prices are in the region of $360 a ton, while GTSP prices are close to $400 per ton. At present, buyers are more than happy (although ‘happy’ may not be the right word) to absorb the increase in input prices."
After factoring in higher prices for Israel Chemicals' products, Merrill Lynch adjusted its estimates for 2008 sales from $4.2 billion to over $4.7 billion, and its 2009 estimated annual sales from $4.357 billion to $4.62 billion. The firm also raised its net income estimates for Israel Chemicals from $653 million in 2008 to $783 million, and from $701 million in 2009 to $758 million.
Merrill notes that "Taking everything into account, we are raising our 12 month price objective to NIS 48 from NIS 39."
Published by Globes [online], Israel business news - www.globes.co.il - on October 22, 2007
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