Despite a second quarter result ahead of estimates, Morgans lowers South32’s rating to Hold from Add, due to a recent share price rally.
Divestment of the company’s South African Energy Coal (SAEC) business is progressing, and management is now targeting sale completion by 31 March 2021.
The broker sees further upside potential from a continuing commodity cycle. While it’s considered there’s less upside potential from aluminium and manganese, coal markets are likely to recover.
The broker reduces the target price to $2.60 from $2.65.
Sector: Materials.
Target price is $2.60.Current Price is $2.66. Difference: ($0.06) – (brackets indicate current price is over target). If S32 meets the Morgans target it will return approximately -2% (excluding dividends, fees and charges – negative figures indicate an expected loss).
