Key Points:
- Harvest Minerals produces organic fertiliser from its plant in Brazil
- Harvest released sales figures and guidance which have led to a 50% jump in the share price
- The question about Harvest Minerals is how much further will this revaluation go?
Harvest Minerals LTD (LON: HMI) is a small producer of entirely organic fertiliser with a plant in Brazil. Given the current trend for environmental, sustainable, governance (ESG) investing Harvest would seem to be in the right sector. Organic farming does require fertiliser, even as the standard itself insists that no artificial ones be used. So, the manufacture of organic fertiliser for this more fashionable form of farming would seem to be sensible.
What matters over and above being in the right sector is, of course, being able to execute the plan. Good ideas are very much more common than good results, as we all know. This is where the excitement in Harvest Mineral’s share price is coming from. They’ve announced their Q4 sales results and they’re well above target.
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As an example of Harvest Mineral’s commitment to ESG standards back in December, they announced that they’d successfully completed their installation of solar power at the plant. That does show they’re doing more than just pretending to meet those sorts of standards and might well tempt some of the wave of ESG money into the stock.
But that pedal hitting the metal requirement is that the business also is successful, not just fashionable. This brings us to Harvest Mineral’s trading update. Note this is only a trading update, it’s not full-year profits, but even so the numbers are impressive. Q4 2021 was 42% up on tonnage sold in Q4 2020. Further, it was up 105% on management forecasts for the quarter. Clearly, Harvest Minerals is making something that people want to buy, not always a sure thing with fashionable production lines.
Further, the forward sales guidance for 2022 is that sales are likely to be 76% up on 2021 numbers.
Even without that forecast for 2022, this shows, as Harvest Minerals says “Such sales performance represents a 46% CAGR (Compound Annual Growth Rate) over the last three years” which is really pretty impressive.
This is of course vastly higher than any growth in Brazilian agriculture over the same time period. Yes, that sector is growing but clearly, the demand for organic fertiliser from Harvest Minerals is growing at a greater speed than the market as a whole.
So, what next for the Harvest Minerals share price? Before this news, the price was at 4.20 pence. Now it’s (at pixel time) 6.20 pence. That’s a, close enough, 50% rise just on these sales numbers. This could go a number of different ways. One is that the market’s entire valuation of the company changes and the share price continues to rise to settle at a significantly higher level. Another is that the excitement wanes and Harvest Minerals gives up some of the current gains. What is highly likely is that the revaluation will, at some point, top out and there will be a fallback from the peak. Trading positions should be determined by evaluations of exactly where that peak will be.