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Investing.com - BNP Paribas (OTC:BNPQY) Exane downgraded K+S AG (ETR:SDF) (OTC:KPLUY) from Neutral to Underperform on Thursday, slashing its price target to EUR8.50 from EUR16.50 previously.
The investment bank cited K+S’s vulnerability to potential downside in potash prices, warning that the company could face considerable earnings decline and negative free cash flow if potash prices fall.
BNP Paribas Exane noted that K+S’s sensitivity to market conditions is worsened by higher-than-expected inflation in 2025, which was identified as the primary driver behind the company’s second-quarter earnings miss.
The bank’s 2026 earnings forecast for K+S now stands 43% below consensus estimates, with its discounted cash flow analysis supporting the significantly reduced price target.
BNP Paribas Exane projects that even assuming mid-cycle pricing from 2027 and a notable decline in German operating expenses, K+S would achieve a free cash flow yield of only 7% by 2029, with cumulative 2026-2029 free cash flow just exceeding EUR100 million, representing approximately 5% of the company’s market capitalization.
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