POT: Potash Corp./Saskatchewan Message Board

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Non-Tech : POT: Potash Corp./Saskatchewan

POT 20.65

0.0%

Jan 2 4:00 PM EST

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To: Dennis Roth who wrote (12)	4/7/2008 8:54:04 AM
From: Dennis Roth	Read Replies (1) of 17

Potash Corp. (POT): Raising price target to $225 on sharply higher earnings estimates - Goldman Sachs - April 07, 2008 What's changed Global fertilizer fundamentals remain exceptionally strong, with potash and phosphate prices continuing their upward trends. Potash producers recently announced substantial price increases in the international markets – India (+355/mt to $625), Brazil (up $150 to 750), and Southeast Asia (up $200 to $725) – reflecting robust demand globally and scarcity of product. Negotiations with China are ongoing and producers remain adamant that prices in China (expired contract at $250/mt) and the rest of the world will narrow considerably or close entirely. We believe the tight potash market is allowing producers to raise prices at will. Given the underlying strength in commodity prices, farmers are still more concerned about maximizing yield and profits rather than controlling fertilizer costs. In addition, phosphate prices continue to surge (exceeding $1,100/mt) on higher sulfur and rock costs (non-integrated producers set the floor price) as well as strong demand. With capacity constrained until 2011, DAP prices will offset higher costs and allow for significant margin expansion for North American producers (they have their own phosphate rock). Implications POT is highly leveraged to potash ($10/mt price increase impacts EPS by $0.20) and phosphate ($0.10 impact). In our view, POT is in the best position in the potash market to benefit from improving demand and rising prices as its greatest near-term opportunity lies in its growing potash capacity. POT is gradually expanding capacity to meet growing demand. Valuation We’re raising our 2008, 2009 and 2010 EPS estimates to $9.00 (+1.65), $12.50 (+$4) and $13.50 (+$3.85), respectively. Our 12-month PT of $225 (+$45) corresponds to 12X our 2009 EV/EBITDA estimates. Key risks Key risks include a severe decline in commodity prices and the weather.

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