LXU - LSB Industries could rise 30% on higher nitrogen prices UBS says

LSB Industries ( NYSE: LXU ) on Wednesday was initiated with a Buy rating and price target of $20 a share by UBS. The bank’s target suggests possible gains of about 30% from the close of $15.28 a share on Aug. 30.

Prices for nitrogen gas will be “significantly above historical norms” in the near term, boosting free cash flow for LSB, the bank said in a report. LSB is the seventh-biggest producer of nitrogen fertilizer in North America.

LSB can generate $3.50 a share in free cash flow, which may double or triple if nitrogen prices in the U.S. rise to levels seen in Europe and Asia. Demand typically is stronger in the December and March quarters, according to UBS.

Its price target of $20 is based on an enterprise value-to-EBITDA multiple of 4.5 times and EBITDA of $419 million for the 12-month period ending in September next year.

Seeking Alpha contributor Mare Evidence Lab has a Hold rating on LSB ( LXU ) on concerns that commodity prices may fall from record highs .

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