The Orica Ltd (ASX: ORI) share price is the best performer on the ASX 200 on Thursday by some distance.
In afternoon trade, the commercial explosives company's shares are up 15% to $13.80.
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Why is the Orica share price charging higher?
Investors have been bidding the Orica share price higher today after brokers responded positively to a trading update on Wednesday.
That update reveals that the company is expecting individually significant items of between $345 million and $370 million to impact its profits in FY 2021. This is largely non-cash and relates to the impairment of goodwill for its EMEA segment and the Burrup plant.
One broker that believes this marks the end of its downgrade cycle is Morgans. In response, the broker has upgraded its shares this morning.
What did the broker say?
According to the note out of Morgans, its analysts have upgraded the company's shares to an add rating with an improved price target of $13.70.
This is roughly in line with where the Orica share price is now trading following today's impressive gain.
Commenting on the upgrade, Morgans said: "We think the earnings downgrade cycle which have plagued ORI for the last few years is now finally over. While ORI still faces both structural and cyclical headwinds, we think the new management team will turnaround the operations to generate more acceptable returns. Trading on an FY22 EV/EBITDA multiple of only 6.8x, we think that ORI is undervalued and upgrade to an Add rating."
What else is being said?
Another broker is even more positive on the Orica share price.
According to a note out of Credit Suisse, its analysts have retained their outperform rating and lifted their price target to $16.11.
Based on the current Orica share price, this implies potential upside of almost 17% over the next 12 months. Its analysts remain positive on the company's outlook following its update
