Soc. Quimica y Minera de Chile SA, Chile’s largest fertilizer company, fell the most in five months after Banchile-Citi recommended selling the stock on predictions that oversupply in the iodine market will cut profit.
SQM dropped 3.8 percent to 16,230 pesos at 12:40 p.m. in Santiago, the biggest decline since Dec. 9. The IPSA index retreated 0.2 percent.
Banchile-Citi, the joint research department of Banco de Chile and Citigroup Inc., reduced its recommendation for SQM to sell from the equivalent of hold. The analysts wrote that a 21 percent drop in iodine prices this year may lead to a 39 percent slump in earnings of that segment, which accounted for 36 percent of gross profit in 2013.
“Iodine challenges continue,” analysts Juan Tavarez and Andrew McCarthy said in an e-mailed note. SQM’s market share “may remain under pressure as new supply continues to ramp up,” resulting in a prolonged period of lower prices. The price of potash, which accounted for 23 percent of gross profit, will also be constrained by a “well-supplied market,” Banchile-Citi said.
SQM’s shares have increased 21 percent in 2014, leading gains among members of the IPSA index. The stock is trading at 19.4 estimated profit for the current calendar year, 20 percent below its average of the last four years.