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Investing.com - BofA Securities has reiterated its Underperform rating and EUR11.00 price target on K+S AG (ETR:SDF) (OTC:KPLUY), citing persistent challenges in the potash market.
The investment bank identified two major obstacles preventing a sustained re-rating of K+S stock. First, BofA points to risks from planned potash capacity additions concentrated in low-cost production areas, which could push potash prices lower and limit profit potential despite efficiency improvements.
BofA noted that mining company BHP’s recent decision to delay its Jansen ’Stage 2’ expansion, partly citing "additional mid-term supply" as a factor, aligns with this cautious outlook. Most planned capacity increases are expected later this decade, with BofA’s MOP (muriate of potash) forecasts adjusted inversely to anticipated supply growth.
The bank’s revised EBITDA estimates for 2025-2027 are 1%, 4%, and 5% below consensus figures from Vara Research, respectively. BofA’s analysis suggests K+S will generate less than €160 million in free cash flow annually from 2025 to 2027.
This restricted cash flow outlook implies an average yield of approximately 2.5% for K+S, significantly below the roughly 9% offered by U.S. potash competitors Mosaic and Nutrien, according to BofA’s assessment.
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