The broker notes Incitec Pivot’s PE discount to peer Orica ((ORI)) is now the largest in a decade, leading the broker to favour the former over the latter.
Orica’s outlook is very much dependent on delivery of Burrup improvement and any slip in timing presents downside risk, the broker suggests. Incitec has suffered an acute earnings downgrade cycle this past six months, but signs are that a bottom may now have been reached.
No change to forecasts for either company. Outperform and a $3.70 target retained for Incitec Pivot.
Target price is $3.70.Current Price is $3.33. Difference: $0.37 – (brackets indicate current price is over target). If IPL meets the Macquarie target it will return approximately 10% (excluding dividends, fees and charges – negative figures indicate an expected loss).