Shares of K+S AG saw a surge of over 7% on Thursday after analysts at Stifel raised their rating on the German potash and salt producer to “hold” from “sell.” The upgrade was driven by rising potash prices and better earnings expectations for 2025.
Stifel also increased its price target for K+S to €14.50 from €10, suggesting a potential upside of 13.7% from the April 10 close of €12.75.
While the company is expected to see an improvement in earnings for the first quarter, results are still expected to be lower than the same period last year. Stifel noted that stronger potash pricing, especially in Brazil, has boosted investor sentiment. The price of muriate of potash in Brazil has risen from $280 per ton to $348.
Stifel analysts predict that K+S could reach the higher end of its EBITDA forecast for the year, which is between €500 million and €620 million. This would be around 7% higher than the consensus estimate.
However, analysts warned that rising costs—particularly for wages and energy—could offset some of the gains. They expect personnel expenses to increase by €20 million and energy costs to rise by up to €50 million. A recent drop in natural gas prices may help alleviate some of the pressure.
K+S anticipates modest growth in sales volumes, with stable potash prices in the second half of the year. Stifel forecasts that the company will generate €300 million in EBITDA from its Canadian Bethune mine, €270 million from German operations, and €100 million from its salt and waste management businesses. Corporate costs are projected to be €45 million.
Stifel used a 6x EV/EBITDA multiple to value the company for fiscal 2025. Their valuation model estimates the salt segment at €1 billion and the Bethune mine at €3 billion, while excluding German mines due to high capital investment and lower free cash flow.
The analysts pointed out that the potash market is more stable than other sectors, which are facing challenges from trade uncertainty and macroeconomic pressures. The potash sector has not been affected by U.S. tariffs, and no significant new supply is expected to enter the market this year. Additionally, maintenance-related shutdowns in Eastern Europe could further limit production.
Despite the recent gains, K+S shares are still down more than 14% over the past year. The company is scheduled to report its first-quarter results on May 13.
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