We remain buyers of Syngenta AG (SYT), after the Swiss agrochemicals group's first-quarter results. We believe Syngenta is one of the safest plays in the sector, which should be reflected in higher valuations.
We are raising our target price to $65, as re-rating continues and currency effects. The depth of its product mix, robust business model, and our confidence in the management's ability to cut costs effectively, support our positive view on the stock.
One of Syngenta's key strengths is its broad base of strong, profitable products in two main divisions: crop protection and seeds. The company builds on these strengths by managing the two as independent units with strong management focus, while looking for opportunities to capture synergies across these two divisions, wherever appropriate.
Syngenta trades at 23.7x our 2008 EPS estimate. We think the discount to Monsanto (MON)is unwarranted, even though Syngenta has lagged behind in the genetically-modified seeds segment. We believe Syngenta should trade in the 27.0x-30x range, which yields a target price of $65. The stock may be more volatile going forward, as the premium valuation is digested by investors but we believe there is room for further upside.
Read the full analyst report on SYT
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