LSB Industries: Nearing The Gate Of El Dorado?

Avondale Partners added LSB Industries, Inc.
to Conviction List as the ammonia production is confirmed. "At current levels, LXU makes for an attractive investment for the next year but we are adding it to our Conviction List given the likelihood of near term positive news and the potential for a rapid share price recovery as ammonia production is confirmed," analyst Daniel Mannes wrote in a note. The analyst said he continues to see the ultimate separation of the company potentially driving shares to $20. Once EDC (El Dorado Chemical Company) has some operating history, Mannes expects LSB to pursue a "broad refinancing" that could be bolstered by the coincident sale of Climate Control Business. "A monetization would reduce leverage on Chemical resulting in a stronger and more viable company," Mannes noted. The company said it is in the final stages of start-up of its new 375,000 ton per year ammonia plant at El Dorado Facility and expects to be producing ammonia in the next several weeks. Mannes, who has an Market Outperform rating on the stock, said LSB is starting up the Ammonia synthesis loop and activating catalysts and could begin ammonia production within 2 weeks. "This is well within management's previous guidance of Q2 production. Following a period of consistent production we expect LXU to PR that the plant is running, which is an important confirmation for investors and a major de-risking event for the shares," Mannes added. Shares of LSB climbed 12.87 percent to $9.03. Mannes has a price target of $15.

Posted In: Diversified ChemicalsMaterialsAnalyst ColorNewsPrice TargetReiterationAnalyst Ratings