Itafos Inc. (TSXV: IFOS) operates as a vertically integrated phosphate fertilizer and specialty products company. The group produces and sells mono ammonium phosphate (MAP), super phosphoric acid (SPA), merchant grade phosphoric acid (MGA), single superphosphate (SSP), and specialty products, including ammonium polyphosphate (APP). 

Key Updates:

• For Q3FY21, the company reported revenues of USD 103.0 million, significantly higher than USD 47.6 million in pcp. This was supported by higher realization prices driven by strong agriculture and phosphate fertilizer market supply and demand dynamics. 
• The group registered an adjusted EBITDA of USD 41.2 million, as compared to adjusted EBITDA loss of USD 0.3 million in pcp.
• IFOS reported a net income of USD 15.7 million, as compared to a net loss of USD 13.8 million in Q3FY20.
• On the flip side, Debt to equity stood at 2.43x in Q3FY21, significantly higher than the industry median of 0.86x. A higher D/E ratio depicts poor financial flexibility.
• Long-term debt to total capital stood at 60.9%, considerably higher than the industry median of 28.8%, which indicates greater balance-sheet risk.

Stock Recommendation:

The group expects its FY21 adjusted EBITDA in between USD 120 to 130 million, while its free cash flow is expected in between USD 60 to 70 million. The stock of IFOS closed below its 50-days and 100-days simple moving average, which indicates a bearish pattern. Hence, considering the aforesaid facts, we give a ‘Watch’ stance on the stock of IFOS at the closing price of CAD 1.30 on January 25, 2022.

One-Year Technical Price Chart (as on January 25, 2022). Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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