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 sturdy demand for nitrogen fertilizer.
“We see a number of optimistic elements 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 gasoline as the primary feedstock,”
Excessive crop costs and pent-up demand going into spring are optimistic for the worth of agricultural chemical substances together with fertilizer, in line 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 gas for marine transport, energy era and hydrogen transport, and for de-carbonizing agriculture.
RBC has a worth goal of $20 a share on LSB (LXU) primarily based on an enterprise value-to-EBITDA a number of of seven instances its estimate for 2025 outcomes, and discounted money move fee of 9%.
“We’re additionally biased in the direction of the upside case as agriculture, vitality and nitrogen markets look set to stay tight,” in line with RBC. “Execution has been wonderful beneath new administration, and the corporate has excessive confidence in realizing advantages from clear ammonia and progress initiatives.”
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.