Shares of Russian potash producers OAO Silvinit and OAO Uralkali may rally an additional 5 percent to 7 percent on top of their current 12-month price estimates if the government stops capping local prices, VTB Capital said.
The two may each add about $100 million to earnings before interest, taxes, depreciation and amortization in 2011 and as much as $300 million in later years as a result, Elena Sakhnova, an analyst at VTB Capital, wrote in a report today.
The bank’s current 12-month estimate is for Uralkali’s depositary receipts to advance 21 percent to $29.58, and for Silvinit’s ordinary shares to climb 8.7 percent to $761. It has a “buy” recommendation on Uralkali and “hold” on Silvinit.
Russia may stop regulating the price of potash sold to local complex fertilizer producers from 2013 and allow greater price flexibility next year, RBC Daily reported yesterday. The cap for Russian farmers will remain in place, RBC said.
The changes would probably knock 5 percent to 15 percent off the potential share price gains of fertilizer producer OAO Acron, VTB said. The bank has a 12-month estimate that Acron stock will rise 27 percent to $37.88 and rates it a “buy.”