Incitec Pivot Ltd T.IPL

BMO's take

[Dibah42]

Valuation Our target price is based on the average of applying an EV/EBITDA multiple of 15x to our 2021E estimates and a DCF. The target multiple is a premium to what we apply to midstream peers given the high proportion of take-or-pay contracts and significant future expected EBITDA from the PDH/PP project beginning in 2022. Upside Scenario $26.00 Our upside scenario of $26 assumes that IPL realizes the full potential from the Heartland petrochemical complex, which we peg at $3 above our $23 target price. Downside Scenario $19.00 Our downside scenario of $19 assumes that forward EV/ EBITDA valuation contracts to 13.5x (current target is 15.0x), due to higher bond yields and change in business mix (i.e., lower contracted exposure). -13% +6% +19% Target Price 23.00 in CAD Current Price 21.76 Downside Scenario 19.00 Upside Scenario 26.00 Key Catalysts 1) Additional contract announcements for the PDH+PP facility (potential in-service late 2021). 2) Successful sale of European bulk storage franchise. 3) Additional growth projects (IPL has identified $4.2B+ of potential project opportunities).