Why Goldman Sachs is bullish on the Mineral Resources share price

The Mineral Resources Limited (ASX: MIN) share price has been a strong performer over the last couple of months.

During this time, the mining and mining services company’s shares have risen an impressive 28% to $58.71.

This has been driven largely by its exposure to lithium, which continues to command sky high prices thanks to its use in electric vehicles and renewable energy.

Can the Mineral Resources share price keep rising?

According to a note out of Goldman Sachs, its analysts believe the Mineral Resources share price can rise further from current levels.

The note reveals that its analysts have retained their buy rating with an improved price target of $69.50.

Based on the current Mineral Resources share price, this implies potential upside of just over 18% for investors over the next 12 months.

In addition, the broker is forecasting a ~3% dividend yield in FY 2023, which stretches the total potential return to approximately 21%.

What did Goldman say?

Although Goldman Sachs wasn’t blown away by either Mineral Resources’ FY 2022 results or its FY 2023 guidance, it remains positive due to stronger than expected lithium prices. It commented:

MIN reported FY22 underlying EBITDA/NPAT of A$1,024mn/A$400mn,-6%/-15% below GSe and VA consensus on lower than expected earnings from iron ore and mining services. […] Guidance for FY23 was slightly negative vs GSe, with higher costs at the iron ore and Wodgina lithium, and ~A$0.5bn higher capex on a short construction timeframe for Ashburton, and flat mining services volumes.

We increase our FY23-25 EPS by -10%/+9%/+39% with higher iron ore and lithium costs in FY23 partly offset by MtM of our Sep Q lithium price forecasts, and InfraCo capital charges lifting outer-year earnings.

Overall, the broker expects a huge profit jump in FY 2023 thanks largely to the company’s lithium operations. It explained:

We forecast a more than doubling of group EBITDA to over A$2.3bn in FY23 driven by higher lithium volumes (LiOH & spod), tailwinds from M-3 lithium pricing lags, and an improvement in low grade iron ore price realisations.

The post Why Goldman Sachs is bullish on the Mineral Resources share price appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Why Core Lithium, Mineral Resources, PointsBet, and Strike Energy are dropping
• Why are ASX 200 mining shares getting hammered on Friday?
• Why is the Mineral Resources share price down a hole on Friday?
• 5 things to watch on the ASX 200 on Friday
• How do IGO shares compare to Mineral Resources following earnings season?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/ZjyMeDv