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Bank Hapoalim affirms Buy rating for agrochemicals maker Makhteshim Agan

Rimon pesticide sales won't boost 2002 results much, but is a step into a key market

Bank Hapoalim reiterated a Buy rating for Tel Aviv-listed agrochemicals maker Makhteshim Agan Industries.

Analyst Rakefet Levison-Apter set a price target of NIS 11, 30% above its current trading level.

Her update follows Makhteshim's announcement of registration to market its only proprietary product, the pesticide Rimon (nuvaluron), in the United States. At first Rimon may be sold only for greenhouse-grown flowers.

Rimon sales in the U.S. should start in the first quarter of 2002, but will probably lift 2002 sales by less than a million dollars.

Although the company's gross margin on Rimon is 50% greater than its average, the pesticide will barely affect net income next year, Levison writes.

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MAI expects to receive registrations to sell Rimon for crops such as cotton, apples and vegetables toward year-end 2002.

Levison believes that once Rimon is approved for edible crops, sales will rise to around $10 million in 2003.

Still, she views Rimon's intro to the States as significant because it gives it a footing in the world's most important agrochemicals market. The U.S. market is key for MAI because of its strategy to decrease exposure in South America, Levison notes.

Rimon is categorized as an environmentally low-risk substance not toxic to mammals, which should boost sales.

Levison-Apter expects Makhteshim's Q3 results to rise above the parallel, but to fall short in the sequential analysis. She predicts reversion to the strength demonstrated in the first and second quarters only in the fourth quarter of this year.

Makhteshim is due to release its third-quarter results on November 11.