Are IGO shares a buy after a huge quarter of profit growth?

IGO Ltd (ASX: IGO) shares have come under pressure with the rest of the market on Thursday.

In morning trade, the battery materials miner’s shares are down over 2% to $14.77.

IGO shares down again

This latest decline means that IGO’s shares are now down 12% since this time last week. That’s despite the company announcing its quarterly update earlier this week and revealing stellar earnings growth.

For the three months ended 30 September, IGO reported a 54% increase in underlying EBITDA to a record $398 million and a massive 136% jump in net profit after tax to $253 million.

This strong growth was underpinned by record quarterly spodumene production at Greenbushes and record sales revenue from its nickel business following the contribution from Forrestania.

Is this a buying opportunity?

According to a note out of Citi, its analysts think investors should keep their powder dry for the time being.

In response to the update, the broker downgraded IGO’s shares to a neutral rating with an improved price target of $15.20.

Its analysts believe the IGO share price is fair value at 1.1x NAV and 6x EBITDA. The broker commented:

SepQ overshadowed by the unexpected death of MD & CEO Peter Bradford. New news were: i) Kwinana (lithium hydroxide) train 1 commercial production expected end of CY23; ii) total capex at Cosmos (Ni) now expected to be double at ~A$810m. SepQ highlight was Greenbushes which more than doubled underlying earnings QoQ. Net debt reduced by A$137m to A$396m. We lift our TP by $1.20/sh to A$15.20/sh and move to Neutral. IGO is now trading on ~1.1xP/NAV and FY24 EV/EBITDA +6x. We expect nickel prices to move lower and lithium to track more or less sideways in the near-term.

Though, that hasn’t stopped one insider from topping up with a large purchase this week. A change of director’s interest notice reveals that its non-executive director, Justin Osborne, picked up 10,000 shares for a total consideration of $148,350 on 1 November.

The post Are IGO shares a buy after a huge quarter of profit growth? appeared first on The Motley Fool Australia.

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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.

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