Canaccord Reiterates Buy on Potash (POT)

July 18, 2008 12:15 PM EDT

Canaccord Adams is out with a research note this morning considering the impacts of Potash Corp.'s (NYSE: POT) recent announcement that it plans to add 2.7 million tonnes of potash capacity in 2012. The firm reiterates its Buy rating and C$425 price target, which equates to roughly US$427.

Potash plans to add the potash capacity at three facilities in Saskatchewan. The firm said Potash "will achieve the capacity increases with a debottlenecking project at Allan as well as increase in scope of the projects that were announced in 2007 for Cory and Rocanville." Potash will boost capacity by 1 million tonnes at Allan, 1 mt at Cory and 0.7 mt at Rocanville.

Canaccord notes that the capacity increases are expected to cost a $1.6 billion, bringing Potash's operational capacity to 18 million tonnes by the end of 2012, which would be a drastic increase from the company's 10.3 mt currently.

The firm mentions that will positive for Potash, the stock will likely see no near-term impact from the development.

Canaccord's price target on Potash is based on 17x the firm's FY09 adj-EPS estimate of $25.21.

Potash Corporation of Saskatchewan, Inc. engages in the production and sale of fertilizers, and related industrial and feed products in North America.

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