Shares of Sabic Agri-Nutrients are expected to rise by greater than 50% over the following 12 months due to a limited fertilizer supply worldwide, in line with Bank of America. The corporate, formerly often known as Saudi Arabian Fertilizer Company, is one in every of the biggest producers of fertilizers, with an annual production capability of about 4.5 million tons. The value increase over the past 12 months for natural gas, a critical raw material, has sent the fee of fertilizers soaring globally , benefiting the Saudi chemical company’s bottom line. Natural gas prices have greater than doubled to $4 per million British thermal units (MMBTU) over the past 12 months as a result of the Russia-Ukraine conflict. In contrast, BofA analyst Sashank Lanka said Sabic Agri-Nutrients pays $1.25/MMBtu for the gas, owing to its relationship with Saudi petrochemicals company Sabic, which is a majority shareholder. “Our Buy rating is driven by our expectations of stable earnings momentum over the medium term,” said Lanka in a note to clients on Jan 3. “We also expect the urea cost curve to steepen, supported by rising gas prices in EU and Asia together with high coal prices,” Lanka added. Although gas prices have eased since their August peak, analysts expect demand to select up in Europe through the winter. “This may increasingly push the gas prices upwards, keeping pressure on European Urea producers and will profit SABIC Agri-Nutrients which has a fixed-cost feedstock,” said Jassim Al-Jubran, head of sell-side research at Aljazira Capital, in a note to clients after the corporate’s third-quarter results last 12 months. Sabic Agri-Nutrients reported a rise in net profits by 93.3% to 2.3 billion Saudi riyals ($610 million), in comparison with the previous 12 months. Al-Jubran expects the stock to rise by 26% to 179 Saudi riyals. Bank of America also noted that China’s export ban of fertilizers, potentially until June 2023, to support domestic agricultural consumption with sufficient supply at low prices will further reduce global supply. While U.S. investors can gain exposure to Sabic Agri-Nutrients through the Franklin FTSE Saudi Arabia ETF , European investors can access the stock through the iShares MSCI Saudi Arabia Capped UCITS ETF.
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