On Thursday, Deutsche Bank adjusted its price target on K+S AG (SDF:GR) (OTC: KPLUY) shares, lowering it to EUR10.00 from the previous EUR12.00, while retaining a Hold rating on the stock. The revision followed K+S's second-quarter results, which led to a change in the bank's financial model for the company.
The bank's analyst cited a decrease in the projected earnings before interest, taxes, depreciation, and amortization (EBITDA) for the years 2024-2025, attributing this to reduced price and margin expectations.
The new forecast for 2024 EBITDA stands at EUR 584 million, which is slightly above the midpoint of the company's own guidance range of EUR 530 million to EUR 620 million. This figure also surpasses the Bloomberg consensus estimate of EUR 572 million.
The bank's revised model takes into account a lower average selling price (ASP) for the Agriculture segment in 2024, now expected to be EUR 313 per ton, compared to the previously anticipated EUR 326 per ton.
This adjustment aligns with the current market prices and K+S management's full-year ASP guidance, which is projected to be around the level of the second quarter of 2024, at EUR 313 per ton.
Additionally, Deutsche Bank now anticipates K+S will achieve a volume of 7.65 million tons in 2024, an increase from the former estimate of 7.45 million tons. This figure is within the range of the company's volume guidance of 7.4 to 7.7 million tons. K+S has already reported a volume of 3.99 million tons in the first half of the year.
The bank's analysis also takes into account the typical seasonal weakness in the third quarter due to scheduled turnarounds and a quarter-over-quarter decline in prices leading into the third quarter. Despite these adjustments, the Hold rating suggests that Deutsche Bank does not recommend a change in investment position at this time.
InvestingPro Insights
As investors digest Deutsche Bank's revised price target and hold rating for K+S AG (OTC: KPLUY), current metrics and InvestingPro Tips can provide additional context. According to InvestingPro data, K+S AG's market cap stands at $2.23 billion, with a high P/E ratio of 450.12, reflecting investor expectations of future earnings growth or a premium for the stock's other attributes. However, the adjusted P/E ratio for the last twelve months as of Q1 2024 is -89.84, which may indicate a market expectation of negative earnings. The company's Price/Book multiple during the same period is notably low at 0.31, potentially signaling undervaluation relative to its book value.
From the InvestingPro Tips, it's worth noting that management has been actively buying back shares, which could be a sign of confidence in the company's future prospects. Additionally, the stock is considered to be in oversold territory according to its Relative Strength Index (RSI), suggesting that it may be undervalued at current levels. This aligns with the low Price/Book multiple and could be of interest to value investors. Moreover, K+S AG pays a significant dividend to shareholders, with a yield of 4.14% as of the latest data, which could attract income-focused investors.
For those seeking a deeper analysis, there are 13 additional InvestingPro Tips available, which include insights on K+S AG's financial health, valuation, and market performance. These tips can be accessed by visiting the InvestingPro platform for K+S AG at https://www.investing.com/pro/KPLUY.
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