The Indian government’s decision to cut subsidies for certain fertilizer products will substantially increase fertilizer prices for Indian farmers and negatively affect global potash markets and shares of fertilizer producers, says Desjardins Securities analyst John Hughes.
India subsidizes fertilizer in response to rising world fertilizer prices and uncompetitive grain prices. It is also wrestling with relatively high levels of inflation, in foodstuff prices in particular.
In an effort to combat soil degradation as a result of overuse of fertilizer, subsidies for di-ammonium phosphate (DAP) and potash are to be cut by approximately one-third, which Mr. Hughes estimates will result in price increases of 45 per cent and 27 per cent, respectively, for Indian farmers
“We believe this is a negative for the DAP and potash markets, and for the shares of Potash Corporation and Agrium Inc.,” he says.
Mr. Hughes estimates that approximately 2 per cent of Agrium’s sales and approximately 4 per cent of Potash Corporation’s sales in 2011 were to the Indian market. In 2010, India accounted for 14 per cent of world potash shipments and 49 per cent of world DAP shipments, according to the International Fertilizer Industry Association.
Upside: Mr. Hughes is reiterating his “buy--average risk” rating for Potash Corp. and $60.20 price target.
Peregrine Diamonds Ltd.’s initiation of a diamond exploration program in the Northwest Territories is encouraging news to Desjardins Securities analyst Brian Christie. Peregrine’s $1.5-million program in the prolific mining area of Lac de Gras – home to three diamond mines including Peregrine’s DO-27 kimberlite mine – will include a revaluation of diamonds from DO-27, which currently has an 18.2 million-carat resource.
Upside: Mr. Christie is reiterating his $1.70 price target.
Torstar Corporation’s fourth-quarter results were slightly better than analysts’ expectations but the outlook for the company remains challenged, says CIBC World Markets analyst Robert Bek. “Despite a solid quarter ... print demand remains muted, and Harlequin's shift to digital remains uncertain,” he says.
Downside: Mr. Bek is maintaining his “sector perform” rating and lowered his price target $2 to $12.
CIBC World Markets Inc. analyst Mark Kennedy is initiating coverage of International Forest Products Limited (Interfor) with an upbeat assessment on the lumber producer. The slow recovery of U.S. housing market should lift new construction as well as repair and renovation expenditures over the next two years, says Mr. Kennedy. Meanwhile, Interfor is well positioned to capitalize on lumber demand growth in Asia, he says.
Upside: Mr. Kennedy has a 12- to 18-month price target of $6.50.
Pengrowth Energy Corp is trading at a relative value discount to its peers and is still trying to prove it can match the market’s expectations, according to UBS Securities Canada analyst Matt Donohue. After battling its way through most of the second half of 2011 on the operations side, Pengrowth appears to be turning the corner, says Mr. Donohue.
Upside: He reiterates his “neutral” rating and $11 price target.