On Friday, UBS analyst Nathan Reilly increased the price target for Incitec Pivot Ltd. (ASX:IPL) (OTC:ICPVF) to AUD3.50, up from the previous AUD3.45, while continuing to recommend a Buy rating for the stock. This adjustment follows the company's Annual General Meeting (AGM), where Incitec Pivot confirmed its ongoing plans to separate its Fertilisers division.
During the AGM, Incitec Pivot outlined its divestment strategy for the Fertilisers business, which includes the sale of real estate assets at Gibson Island expected to begin in the first quarter of 2025 and the sale of distribution assets set to start early in the calendar year 2025 with an aim to complete by mid-2025. Additionally, the company plans to halt manufacturing at its Geelong facility by the end of December 2025 and is conducting a strategic review of Phosphate Hill, with completion targeted by September 2025.
The company is also embarking on a transformation program with the goal of doubling the FY23 EBIT of its Dyno Nobel business within the next three to four years, targeting approximately $600 million EBIT by FY27. This projection suggests roughly a 10% increase over the current consensus estimates for FY27.
UBS anticipates that the market will closely monitor Incitec Pivot's progress in expanding its footprint in Latin America and the EMEA region, which is expected to contribute about 15-25% of the benefits from the transformation program. The firm's analysis indicates that the market is waiting for Incitec Pivot to demonstrate its capability to achieve the full earnings potential outlined in the transformation program before fully reflecting these benefits in the company's valuation.
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