On Friday, Citi resumed coverage on Incitec Pivot Ltd. (IPL:AU) (OTC: ICPVF), assigning a Neutral rating and setting a price target of AUD3.00. The firm had previously suspended its rating on the company. Incitec Pivot, known for its manufacturing of fertilizers and explosives, has halted its fertilizer sales process and is initiating a share buyback program valued up to AUD900 million. The company also reaffirmed the guidance provided in May.
The performance of IPF Distribution remains strong, although production volumes at Phosphate Hill are anticipated to be at the lower end of the forecast range set out in May. Citi notes that while the company's FY26 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) and price to earnings (PE) multiples appear modest at 6.7 times and 10.7 times respectively, there is still investor concern regarding the volatility of earnings from the fertilizer segment.
The analyst pointed out that despite the company's reaffirmation of its May guidance and the ongoing performance of its distribution segment, the expected lower production volumes could influence investor sentiment. Additionally, the analyst suggested that due to these concerns, Incitec Pivot's shares are likely to continue trading at a discount compared to its peer Orica's multiples.
The company's decision to resume its share buyback program follows the cessation of its efforts to sell its fertilizer business. Incitec Pivot's management has not provided further details on the reasons behind the discontinuation of the sales process or the potential impact on the company's strategic direction.
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