Lehman Brothers is cautious about Makhteshim Agan Industries Ltd. (TASE: MAIN) in a new review on the agrochemicals sector. The investment bank gives the industry a "Neutral" rating. As for Makhteshim, it says that the company "needs to deliver premium growth and improved operating leverage to justify a re-rating."
Lehman Brothers says that such improvement at Makhteshim is achievable thanks to the company's current reorganization, the gradual improvement of pricing and products mix, and the $1 billion sales opportunity as products' patents expire over the next five years. The investment house says that slowing organic growth does not bode well for the company's second quarter results. It also predicts that the company's quarterly organic growth rate will slow to 12% for the second quarter compared with the preceding quarter, compared with the 22% growth in the first quarter, a growth rate that is in line with the investment bank's growth forecast for the industry.
Lehman Brothers predicts that Makhteshim's earnings per share will grow by 23.2% to $0.14, thanks to increased operating income, but high financing charges and a low tax rate.
Lehman Brothers concludes, "In our view, Makhteshim's poor year-to-date relative performance (-15% versus the European chemicals sector), despite the strength of the crop protection sector is largely because of the poor implementation of market expectations and related concerns by investors regarding the company’s strategy."
Lehman Brothers predicts that Makhteshim will post a net profit of $64 million on $658 million revenue for the second quarter and a net profit of $230 million on $2.46 billion revenue for the year.
Published by Globes [online], Israel business news - www.globes-online.com - on July 17, 2008
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