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Incitec Pivot Ltd IPL

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Company Report

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Incitec Pivot: Fertilizer Business Remains in the Fold for Now and Guidance Reiterated

Mark Taylor

No-moat explosives and fertilizer manufacturer/distributor Incitec Pivot ceased negotiations for the sale of its fertilizer business in July 2024. Despite an intention to continue to assess options for structural separation, perhaps via a demerger, the closure of negotiations at least allowed an AUD 900 million on-market share buyback to proceed. We applaud the decision not to rush a fertilizer sale. The segment comprises about one third or AUD 1.20 per share of our fair value estimate.

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Price vs Fair Value

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IPL is trading at a 674% premium.
Price
A$2.97
Fair Value
A$5.60
Uncertainty
Medium
1-Star Price
A$5.27
5-Star Price
A$7.73
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Investors enjoy bumper dividends at peak cycle times.

Bears

Fertilizer prices are volatile, leading to earnings volatility. Incitec Pivot has no pricing power in this market.

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Trading Information

Previous Close Price
—
Day Range
—–—
52-Week Range
—–—
Bid/Ask
— / —
Market Cap
—
Volume/Avg
— / —

Key Statistics

Price/Earnings (Normalized)
31.07
Price/Sales
1.11
Dividend Yield (Trailing)
3.13%
Dividend Yield (Forward)
2.90%
Total Yield
3.13%

Company Profile

Incitec Pivot is a leading global explosives company with operations in Australia, Asia, and the Americas. We estimate its share of the global commercial explosives market at about 15%. Explosives contributes around 80% of EBIT. Incitec Pivot is also a major Australian fertilizer producer and distributor and is the only Australian manufacturer of ammonium phosphates and urea. Ammonium phosphates are sold in the domestic market and exported.
Sector
Basic Materials
Industry
Specialty Chemicals
Stock Style Box
Mid Value
Total Number of Employees
4,500
Website
https://www.incitecpivot.com.au

Competitors

Valuation

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Metric
IPL
ORI
NTR
Price/Earnings (Normalized)
 31.0721.0012.81
Price/Book Value
 1.081.870.97
Price/Sales
 1.111.090.92
Price/Cash Flow
 10.777.635.90
Price/Earnings
IPL
ORI
NTR

Financial Strength

Metric
IPL
ORI
NTR
Quick Ratio
 1.141.070.76
Current Ratio
 1.851.691.26
Interest Coverage
 −0.515.312.57
Quick Ratio
IPL
ORI
NTR

Profitability

Metric
IPL
ORI
NTR
Return on Assets (Normalized)
 3.78%4.37%3.68%
Return on Equity (Normalized)
 6.39%9.29%7.77%
Return on Invested Capital (Normalized)
 5.96%7.37%6.27%
Return on Assets
IPL
ORI
NTR

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