Citi has raised its ammonia and urea price forecasts aggressively as the Russia-Ukraine conflict looks to weigh on the market, but leverage to ammonia spreads should benefit Incitec Pivot as the fertilser market tightens and prices increase.
While high pricing typically slows fertiliser demand, citi notes rapid grain price rises should encourage persisting sales. The broker has increased Incitec Pivot’s earnings forecasts 71% and 146% in FY22 and FY23, equating to $1.73bn and $1.86bn respectively.
Despite a strong pricing environment, Citi does warn the stock price has already increased sharply to $3.70 from $3.05 and the broker is reluctant to chase shares at current levels.
The Neutral rating is retained and the target price increases to $3.85 from $3.45.
Sector: Materials.
Target price is $3.85.Current Price is $3.72. Difference: $0.13 – (brackets indicate current price is over target). If IPL meets the Citi target it will return approximately 3% (excluding dividends, fees and charges – negative figures indicate an expected loss).
