Bloomberg News

SQM Falls as Morgan Stanley Cuts to ‘Underweight’ on Demand

December 15, 2011

(Updates with closing share prices.)

Dec. 15 (Bloomberg) -- Soc. Quimica & Minera de Chile SA, Chile’s largest fertilizer producer, posted the longest losing streak in three years as Morgan Stanley recommended an “underweight” position for investors on its valuation versus peers and expectations for slower demand from potash buyers.

Soquimich, as the company is also known, retreated 0.2 percent to 26,494 pesos at the close in Santiago, its ninth consecutive day of losses.

Morgan Stanley cut the stock from “equalweight” and set a 2012 price estimate of $50 per American depositary receipt, citing potential reductions in demand for potash from major consumers India and China, and valuation multiples for fertilizer companies.

“After a strong 2011 for potash, we expect a tougher 2012,” analysts Javier Martinez, Wesley Brooks and Wendell Goncalves wrote in a note to clients dated today. “With grain prices off 20 percent and an uncertain macro outlook, buyers will likely delay/reduce purchases.”

Relative valuation versus peers also will limit gains, the analysts wrote. Soquimich trades at 17.3 times its enterprise value over earnings before interest, tax, depreciation and amortization, compared with 8.82 times for Potash Corp of Saskatchewan Inc. and 5.36 times for The Mosaic Co., according to data compiled by Bloomberg.

--Editors: Brendan Walsh, Glenn J. Kalinoski

To contact the reporter on this story: Eduardo Thomson in Santiago at

To contact the editor responsible for this story: David Papadopoulos at

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