Mineral Resources Broker Ratings – 30th October

Morgan Stanley: After re-evaluating the 1Q results for Mineral Resources, Morgan Stanley has adjusted its target from $74 to $64, maintaining an equal-weight rating. The industry is currently seen as appealing. The analysts express concern regarding the company’s financial stability as they approach FY24, expecting a gearing of about 49%. There are also persistent worries about fluctuating commodity prices and rising inflation. In comparison to the general expectations for the 1Q, the Mt Marion operations of Mineral Resources saw prices and sales fall short by -12% and -9%, respectively. The production matched Morgan Stanley’s predictions but was -5% below the general consensus. On a brighter note, iron ore production surpassed both the analysts’ and the consensus estimates by 7% and 8%, respectively. However, the revenue from Mining Services was slightly below the broker’s expectations.

Ord Minnett: After the first quarter, Mineral Resources has maintained its annual predictions, expecting an iron ore production of 16.5-18.8m tonnes and 360-440 kilotonnes of lithium equivalent spodumene. However, Ord Minnett has reduced its earnings per share estimate for the year by -20% due to anticipated lower lithium prices. Still, the broker holds a positive outlook for a surge in lithium prices, foreseeing a potential deficit in 2024 as demand surpasses supply.

Bell Potter – Mineral Resources disclosed a subdued quarterly outcome as sales trailed production due to declining lithium product prices. While production matched Bell Potter’s predictions, sales fell short due to interim haulage and shipping setbacks. The broker anticipates the delayed shipments to materialize in the Dec Q. However, lithium prices have been on a declining trend since the last quarter, and this trend persists into the Dec Q. As Mineral Resources is currently experiencing substantial production expansion, Bell Potter foresees more announcements about growth late in 2023 or at the beginning of 2024, linked to several projects.

Macquarie – Macquarie noted that the Q1 results from Mineral Resources were a bit “underwhelming”, with both iron ore and lithium sales volumes not meeting expectations. The broker mentioned that lithium shipments faced disruptions due to port closures. However, the achieved prices matched what was anticipated. Short-term predictions have been lowered. The price target has been adjusted to $83, down from $84. Nonetheless, the “Outperform” rating remains unchanged.

UBS – The September-quarter update from Mineral Resources had a mixed bag of results; while iron ore production exceeded expectations, lithium didn’t quite hit the mark. The management has reiterated its guidance. The broker pointed out that even though iron ore production was robust, the shipments didn’t fare as well. UBS has revised its predictions to account for the softer spodumene and lithium prices, increased expenses, and a slow-paced ramp-up at Mt Marion. Projected EPS is expected to drop by 13% in FY24, 10% in FY25, and 4% in FY26.