Incitec Pivot – seeing a phosphate move

Diammonium phosphate (DAP) prices have seen a 36% rise since the November 13 low of US$478 a tonne. 

This change in price is seeing broker moves in IPL as the DAP prices are positively impacting the 2014 earnings forecast by as much as 2% for every US$10 a tonne move.

The sharp increase in global DAP prices was expected considering the tightening on supply by sub-continent nations that are looking to moderate the fertiliser environment.

Currently the consensus read for DAP prices in FY14 has been upped to US$445 a tonne from US$390 a tonne at the previous revision. This move is impacting IPL’s EPS positively and is seeing target prices shifting as the above assumptions see earnings higher by as much as 15%.

Considering the relatively stable earnings stream IPL develops from its explosives divisions, any positive increases to the slightly volatile fertiliser division has strong upside potential. IPL believes China demand has increased in the off season and expects DAP flows to increase into the second half of the year when earnings ramp up.

The earnings breakdown half on-half sees a 30:70 ratio split between first half and second half; however this may alter further as IPL takes advantage of the global price increases.

These developments have seen the consensus price target upped to $3.38, which represents a 9.5% upside. The technical charts are also supportive of the stock, with the uptrend yet to be broken and volumes remaining robust. IPL looks to be a good short-term trade as brokers rush to update forecasts and target prices. 

IG Charts

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen. 79% van de retailbeleggers lijdt verlies op de handel in CFD’s met deze aanbieder.
Het is belangrijk dat u goed begrijpt hoe CFD's werken en dat u nagaat of u zich het hoge risico op verlies kunt permitteren.
CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.