![]() ![]() MOS NTM EBITDA multiples valuation trend (koyfin) Hence, investors need to consider that while Mosaic's underlying metrics should remain robust, the company could be entering a significant period of growth digestion, which could impede further upward momentum in its stock. Notwithstanding, the company is still expected to post robust profitability through FY24, even though its profitability profile is also estimated to moderate further. Mosaic Adjusted EBITDA margins % and FCF margins % consensus estimates (S&P Cap IQ) ![]() Accordingly, we believe these estimates are credible, as Mosaic is unlikely to sustain its current growth cadence with the prospects of further normalization. Therefore, we believe it's critical for investors to accord higher precedence to the thesis of further demand destruction, which could moderate Mosaic's growth momentum further.Įven the bullish consensus estimates suggest that Mosaic's revenue could decline by 22.4% in FY23, followed by another decline of 32% in FY24. Mosaic Revenue change % and Adjusted EBITDA change % consensus estimates (S&P Cap IQ) The sad part is potash demand has gone down because of high prices." Investors Need To Expect Further Normalization ![]() One of India's top importers for potash, Indian Potash Limited, highlighted: "Our potash availability is comfortable. Notably, potash consumption is expected to fall to 3M tons through March 2023, compared to 5M tons in the previous year. Therefore, farmers have resorted to using " less of it to grow crops like rice, wheat and sugar." Bloombergįurthermore, India was also cited as importing less potash as farmers couldn't cope with the high prices in the market. Farmers are able to skip application of phosphate fertilizers without compromising yields since the soil can retain this nutrient for more than a year. With prices at record levels, farmers decided to reduce applications to protect their margins. However, we are less concerned with the transitory impact, as no significant damage was done to Mosaic's production facilities, and the delayed shipments could be moved to Q4.īut, we are increasingly concerned with whether the market had adequately priced in further demand destruction across all its business segments as the world moves closer to a global recession.įor instance, Bloomberg reported in a recent commentary that "Brazil has so much fertilizer that shipments are getting turned away." Notably, the high prices in the market have forced farmers to apply lesser phosphate fertilizers to mitigate the impact on their margins. Mosaic's phosphates sales volume was cut further to 1.6M-1.65M tons from its initial Q3 guidance of 1.7M-2M tons due to the recent Hurricane Ian disruption. Don't Ignore Demand Destruction Due To Unsustainable Prices As such, investors can consider waiting for price action signals indicating the failure of the current relief rally before cutting exposure further.Īccordingly, we reiterate our Hold rating on MOS. Notwithstanding, the selloff through September has created a near-term bottom for MOS. Therefore, we assess that MOS will likely find significant selling resistance trying to navigate its way above August highs as its growth continues to normalize. While it's still expected to be well above its historical average, we believe it could put further pressure on MOS to move much higher from here. Mosaic's revenue and profitability growth is projected to fall further through FY24 as the underlying demand/supply imbalances normalize further. It also had to deal with market volatility that saw MOS fall more than 25% from its August highs to its recent September lows.Ĭoupled with the threat of further demand destruction due to high fertilizer prices, we believe investors need to be wary about buying the recent dip. The Mosaic Company ( NYSE: MOS) has had a tumultuous few weeks as it had to deal with the potential disruptions from Hurricane Ian, which is expected to impact phosphates production through Q4. ![]()
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