These are USD targets. GLTA
Stable Pricing In 2024? Q4/23 Review Our Conclusion
After two years of pricing volatility, we believe we are entering a more stable
ag. input pricing period. For 2024, we remain constructive with Retail
earnings normalizing, Potash market supply/demand looking more balanced,
better Nitrogen operating reliability, and lower capex levels (new NCIB). We
lower our DCF-based price target to $76 from $87 to reflect lower wholesale
fertilizer margins longer term, and reaffirm our Outperformer rating. Note, our
price target implies an ~8x EV/EBITDA multiple on our 2025 estimates (in
line with NTR’s and POT/AGU’s historical mean). NTR currently trades at
~6.5x.
Key Points
Maintaining $7.0B-$7.5B Mid-cycle Adj. EBITDA Expectation: NTR is
maintaining its $7.0B-$7.5B normalized mid-cycle EBITDA target (~$1.5B
higher than 2024 consensus). Retail should rebound to a normalized
EBITDA range of $1.9B-$2.1B (vs. 2023A of $1.5B and 2024 guidance of
$1.75B). Nitrogen and Potash volumes should rise by 1Mt-1.5Mt and 1Mt-
2Mt, respectively vs. 2023 levels. Also, structural shifts, including higher-for-
longer global gas/energy prices, shifts in trade flows, and inflation support
higher-than-historical average pricing levels (and slightly above current spot
prices, particularly for international potash).
Balanced Potash Market In 2024: NTR expects a balanced and stable
market in 2024 (with some potential for prices firming as demand picks up),
with incremental demand offset by supply from Russia, Belarus, Canada and
Laos. NTR expects global industry shipments to rise to 68Mt-71Mt in 2024
(up 2Mt Y/Y at the midpoint). This should be led by Southeast Asia (2Mt) on
strong palm oil/rice economics after two years of underapplication, Europe
(1Mt), India and Latin America (outside of Brazil, where demand should be
flat Y/Y), offset mostly by China (-2Mt) following record 2023 imports. North
American spring demand should remain at elevated levels (flat for the year).
Retail Positioned For Growth In 2024 And Beyond: NTR is guiding for
midpoint Retail adj. EBITDA of $1.75B ($1.5B in 2023). Overall Retail
fertilizer inventory is well positioned and down ~10% Y/Y at 2023-end. In
North America, strong demand to end 2023 has carried into the new year,
with NTR highlighting healthy grower pre-pay commitments and a strong
seed order book for spring planting in 2024. In Brazil, there is some
uncertainty over Safrinha corn plantings in 2024, but soybean acreage
should expand, and NTR expects to see strong fertilizer imports in Q2/24
and Q3/24. Brazil crop protection margins should see a recovery in H2/24.
Improved Nitrogen Operating Rates In 2024: NTR made a number of
investments in 2023 to improve reliability, and pulled forward major
turnarounds to H2/23 (Geismar and Borger). Since then, these facilities have
been running extremely well. As a result, NTR is guiding for 2024 Nitrogen
segment volumes to increase by ~500kt Y/Y at the midpoint. Note, this does
assume that Trinidad will continue to see gas-related curtailments in 2024.