Wunderlich Securities Reaffirms on Intrepid Potash, Keeps PT

In a report published Tuesday, Wunderlich Securities analyst Brian Butler reaffirmed a Buy rating on Intrepid Potash (NYSE: IPI), keeping its $22.00 price target.

“Assuming a $335/ton potash price we estimate that IPI can experience nearly a $165mm swing in FCF in 2014 from a negative $115mm in 2013 to a positive $50-$55mm in 2014,” the report said. “The capacity expansions coming on-line for both potash and langbenite coupled with low production costs support low double digit FCF for the next five years and then FCF settles into a lower sustainable growth rate.”

According to the report, given IPI's geographic transportation edge even if acreage planted transitions from corn to soybeans, using less fertilizer, IPI should capture share to produce and ship 7.5-10% more potash volume. Wunderlich analysts anticpate at least a 15% year-over-year volume growth on higher selling prices.

Some key points from the report included:

-”The South American soybean harvest will leave stocks-in-use up a little. In 2014 it appears a shift from corn to soybeans is likely.” -”In five years IPI expects 35% of its sales/production of potash will be from low cost/ton solar solution compared to about 15% today.” -”Looking out over the next five years annual growth spending is $25mm to $50mm not $200mm as it has been for the past two plus years.”

IPI closed Monday at $15.85.