Barclays Capital is bullish on Israel Chemicals Ltd. (TASE: ICL), giving an "Overweight" recommendation and target price of NIS 68, a 28% premium on today's opening price, based on the latest Chinese potash contract by Russian rival producer JSC Belarusian Potash Company (BPC) at $470 a ton for 500,000 tons.
Barclays analyst Joseph Wolf says that this contract and the global spot price trends in Brazil, Asia, and Europe provide with a high degree of confidence that Israel Chemicals' average potash price will be $440-450 per ton in 2011. Potash prices in the first half of the year were around $400 per ton.
Israel Chemicals had a 15% market share in China in 2010, which is a key end market, together with India, where it has a 20% market share. The company does not sell through a consortium in China, but directly to large distributors. He believes that prices for upcoming potash contracts with India will near the Chinese price, due to rising global potash prices and India's low inventory.
Citing the underperformance in Israel Chemicals' share price, Barclays sees the positive developments in the potash industry as an opportunity to buy the stock.
Israel Chemicals' share price rose 2% by mid-afternoon to NIS 53.75, giving a market cap of NIS 53.75.
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