Scotia Capital’s Michael Doumet raised his target for Ag Growth International Inc. to $55 from $53 with a “sector outperform” rating. Others making changes include: Raymond James’ Steve Hansen to $55 from $50 with an “outperform” rating, ATB Capital Markets’ Tim Monachello to $64 from $65.50 with an “outperform” rating and CIBC’s Jacob Bout to $48 from $45 with an “outperformer” rating. The average is $53.10.
“In our view, AFN shares are cheap (15-per-cent discount to historicals),” said Mr. Doumet. “Healthy FCF generation will transfer value from debt to equity (more than $10 per share in FCF through 2023E). The only remaining potential hurdle is assessing the company’s ability to compound growth on top of a very strong 2022 (and 2021). That being said, we came away from the conference call increasingly confident that EBITDA growth will continue into 2023. First, margins have ramped through 2022, up 180 year-to-date, but up 420bp in 3Q. Second, there appears to be increasing momentum (and pent-up demand) in the Farm business in Canada and, to a lesser degree, in the U.S. In its operations in Brazil and India, where the backdrop is strong (and admittedly, more variable), it is gaining significant market share. Not everything has to go right for shares to work well. But, if they do line up, we see material upside.”