Fortescue Metal Group’s 1H result was close to Morgans expectations. There was no change to FY22 guidance for production, unit costs and capex. The dividend ($0.86) fell at a greater rate than earnings as the payout ratio fell to 70% from 80%.
After the analyst updates forecasts for the result, increasing 2H expense assumptions and raises estimated cash costs (C1), the target price falls to $18.80 from $20.20.
The broker anticipates a difficult outlook given declining iron ore prices, increasing low-grade discounts, and severe cost headwinds. Hold.
Sector: Materials.
Target price is $18.80.Current Price is $21.15. Difference: ($2.35) – (brackets indicate current price is over target). If FMG meets the Morgans target it will return approximately -12% (excluding dividends, fees and charges – negative figures indicate an expected loss).
