The company has downgraded guidance again for FY19 and pulled forward a strategic review of the fertiliser business. Credit Suisse was not surprised by the drought-driven downgrade but further plant downtime at the Louisiana plant is of concern.
While a repeat of the disruptions in the first half may be unlikely, the broker errs on the side of caution and expects the dividend may be cut and discretionary capital expenditure reduced.
The broker suggests the strategic review of fertiliser will probably mean its valuation of this business is not realised. Credit Suisse finds the explosive business much more attractive. Outperform rating maintained. Target is reduced to $3.73 from $3.78.
Target price is $3.73.Current Price is $3.07. Difference: $0.66 – (brackets indicate current price is over target). If IPL meets the Credit Suisse target it will return approximately 18% (excluding dividends, fees and charges – negative figures indicate an expected loss).