Deutsche Bank analysts Richard Gussow and Dan Harverd have raised their target prices for MA Industries (Makhteshim Agan) (TASE: MAIN) and Israel Chemicals (TASE: CHIM). Gussow and Harverd rate both stocks "Buy".
For Makhteshim-Agan, the price target is raised from NIS 37 to NIS 40. The current stock price on the Tel Aviv Stock Exchange is NIS 33.25, so that the new target price represents a 20% premium.
The target price for Israel Chemicals is raised from NIS 72 to NIS 81, which represents a 19.4% premium over the current price on the Tel Aviv Stock Exchange of NIS 67.84.
"Makhteshim-Agan's first quarter 2008 results easily beat our estimates, as revenue, EBIT, EBITDA and net income were all at record levels…Most impressive was gross profit margin, which rose to 36% from 35% a year ago, despite rising input costs," Gussow and Harverd write.
"Makhteshim-Agan's record first quarter results point to strong sector fundamentals, as the company succeeded in increasing profitability despite rising input costs. High demand and rising prices for its products helped offset higher energy costs. Although subsequent quarters are likely to show slower growth, we nevertheless view the results as an indicator of the general positive trend. We have increased our earnings estimates and we have raised our target price to NIS 40."
On Israel Chemicals, the analysts write, "Price rises in potash and phosphates continue unabated. We are raising our estimates to reflect the recent increases, and we have raised our 2008 EBITDA estimates by 9%. With demand strong, inventory tight and little additional potash or phosphate capacity coming on-line in the near to medium term, we see current trends continuing for the foreseeable future, and we are raising our target price to NIS 81.
"In the past month there have been reports of some sales of potash to Asian and Latin American markets for $1,000/ton for third quarter 2008 delivery. We are currently modeling an average price of $ 567/ton in our forecasts for 2008. While we feel it may be premature to incorporate the $ 1,000 ton in our model, if this price is sustainable long-term it would imply 50% upside to our valuation."
Published by Globes [online], Israel business news - www.globes.co.il - on May 15, 2008
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