Despite the improvement in the global commodity cycle, UBS believes the Australian ammonium nitrate market is not in balance.
This situation is expected to prevail for the next few years because of the company’s spare capacity at Yarwun and the ramp up of the Burrup facility in Western Australia.
Excess capacity is unlikely to be fully absorbed by the demand that is forecast through to FY22, constraining price inflation. Still, prices have largely bottomed in the broker’s opinion.
UBS reinstates coverage with a Buy rating and $18.86 target.
Target price is $18.86.Current Price is $17.20. Difference: $1.66 – (brackets indicate current price is over target). If ORI meets the UBS target it will return approximately 9% (excluding dividends, fees and charges – negative figures indicate an expected loss).