FOSAGRO shares (MCX: PHOR) from the beginning of the year added more than 30% in the cost after overcoming the mark of 3,300 rubles. Even on the sidewall of our market since the beginning of the year, the company's quotes are updated every day and new and new vertices.
Cause at high fertilizer prices. Since world fertilizer manufacturers have a significant part of the costs depends on gas, the rise in gas prices leads to an increase in fertilizer prices (the second factor is the rise in prices for agricultural culture). The phosagro works in Russia and consumes gas at adjustable prices that do not grow after the world.
In this article, we will cover the reasons for the rally and estimate the ceiling of this movement.
The nature of rising prices in high demand and problems in the proposal
The price of phosphoric fertilizers began to grow sharply from the beginning of 2021. We wrote about this in our latest monthly market reports. We see several fundamental reasons for such growth in quotations:
- Low DAP / MAP fertilizer stocks in India and in other fertilizer importing countries and the growth in demand in front of the spring sowing (high season in phosphorus is 2 and 3 quarters).
- Loge in the performance of phosphate fertilizers in India itself due to the closure of plants during the spring period of the pandemic 2020
- American duties against Moroccan and Russian deliveries create a deficit in the US market, which pushes prices for fertilizers up.
- Reduced Chinese exports after reorienting internal supplies. We see a steady trend in this coming quarters.
- Still high gas prices and price increase in the nitrogen segment.
- The weakness of the dollar index and intelligence moods.
All this pushed prices for phosphoric fertilizers such as DAP / MAP to the mark above $ 500 / ton. Even before the new year, the price of $ 380-400 / ton was considered excellent for the future growth of financial results.
The American DAP / MAP quotes struck at $ 600 / t on the introduction of duties to Moroccan and Russian phosphoric fertilizers and strengthening demand in front of the spring sowing.
We expect to continue this movement
We assume that high prices for phosphoric fertilizers are a steady trend at 1P2021. Its continuation will depend on the sustainability of the above factors: gas prices, fertilizer stocks before sowing, etc.
Also, the essential effect on prices will have the success of the sown: farmers collect harvest, sell it at prices higher than last year, and can finance the procurement of fertilizers. Such logic was traced from Indian Agrarees in 2020.
In this regard, the phosagro may be overestimated by the market above 4400 rubles. But the movement above this mark will be limited to still high duty and uncomfortable for high dividends ND / EBITDA coefficient above 1.8x.
The article is written in co-authorship with analytics Nikita Kudido
Read Original Articles on: Investing.com