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LSB Industries (NYSE:LXU) on Thursday was rated as an Outperform by analysts at RBC who mentioned the maker of business and agricultural chemical substances can profit from robust demand for nitrogen fertilizer.
“We see a number of optimistic components that time to potential nitrogen worth upside,” Andrew D. Wong, analyst at RBC, mentioned in a Nov. 17 report. “LSB (LXU) ought to profit as a US-based pure-play nitrogen producer utilizing low-cost home pure fuel as the primary feedstock,”
Excessive crop costs and pent-up demand going into spring are optimistic for the value of agricultural chemical substances together with fertilizer, in keeping with RBC.
The financial institution additionally foresees alternatives for LSB (LXU) in producing low-carbon “blue” ammonia and no-carbon “inexperienced” ammonia. The chemical substances have a number of doable makes use of together with gasoline for marine delivery, energy era and hydrogen transport, and for de-carbonizing agriculture.
RBC has a worth goal of $20 a share on LSB (LXU) based mostly on an enterprise value-to-EBITDA a number of of seven occasions its estimate for 2025 outcomes, and discounted money stream price of 9%.
“We’re additionally biased in direction of the upside case as agriculture, vitality and nitrogen markets look set to stay tight,” in keeping with RBC. “Execution has been glorious below new administration, and the corporate has excessive confidence in realizing advantages from clear ammonia and development initiatives.”
LSB (LXU) has risen 18% this 12 months by Nov. 16, contrasting with a 12% for the Normal & Poor’s 400 mid-cap index (SP400).
Searching for Alpha contributor Fade the Market charges LSB (LXU) as a Purchase on demand for nitrogen. Columnist Mare Proof Lab has a Maintain ranking on LSB (LXU) on the likelihood that commodities costs will fall.
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