Merrill Lynch analyst Haim Israel predicts that Israel Chemicals Ltd. (TASE: CHIM) will report a strong third quarter when it publishes its financials on November 20. The investment bank gives the company a "Buy/medium risk" recommendation with a target price of NIS 48, a 20% premium on its market price of NIS 40.
Merrill Lynch predicts 17% year-on-year sale growth to just over $1 billion for the third quarter, which will likely be partly offset by the overall rise in the cost base and currency effects, including shipping, sulfur, and energy. It predicts a net profit of $140 million, up 48% on the corresponding quarter.
Merrill Lynch predicts, "Strong potash shipments and the benign pricing environment should translate into a record quarter. Third quarter potash prices have passed the $300 per ton barrier." However, "Contrary to the strong trends in fertilizers, we expect the industrial division’s soft patch to have continued in the third quarter as a result of low volumes, rising Bisphenol A prices and pricing stagnation. Israel Chemicals is more exposed versus its US peers to Chinese supply, and thus we are expecting the trends to last into the fourth quarter. The integration of Astaris is going to plan and downstream activity is achieving better margins on higher input prices."
Finally, although magnesium prices are still rising, margins are not "because of the sharp increase in energy costs and the cost base is likely to neutralize the impact from surplus revenues."
Israel Chemical rose 1.2% by midday today to NIS 41.20.
Published by Globes [online], Israel business news - www.globes-online.com - on November 14, 2007
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