Ann: Financial Results and Outlook Year Ended 30 June 2021, page-29

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Thursday, 16 September 2021

S32 - SOUTH32 LIMITED

Citi rates S32 as Buy (1) - As also reported yesterday, commodity analysts at Citi have responded to rapidly changing market dynamics for aluminium by raising their price forecasts.

Citi's aluminium price forecasts are now for an average of US$2,475/t in 2021 and US$3,010/t in 2022, from respectively US$2,450/t and US$2,765/t prior.

Also noteworthy, the analysts believe spot aluminium prices can touch US$2,900/t in 0-3 month and US$3,100/t in 6-12 months as structural supply constraints spur on traders and speculators.

On revised forecasts, South32 remains a Buy while the price target moves to $3.80 from $3.50.

Target price is $3.80 Current Price is $3.37 Difference: $0.43 If S32 meets the Citi target it will return approximately 13% (excluding dividends, fees and charges). Current consensus price target is $3.66, suggesting upside of 8.5%(ex-dividends)The company's fiscal year ends in June.

Forecast for FY22:

Citi forecasts a full year FY22 dividend of 21.28 cents and EPS of 41.37 cents . At the last closing share price the estimated dividend yield is 6.32%. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 8.15. How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 31.5, implying annual growth of N/A. Current consensus DPS estimate is 14.5, implying a prospective dividend yield of 4.3%. Current consensus EPS estimate suggests the PER is 10.7.

Forecast for FY23:

Citi forecasts a full year FY23 dividend of 25.27 cents and EPS of 49.22 cents . At the last closing share price the estimated dividend yield is 7.50%. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 6.85. How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 31.8, implying annual growth of 1.0%. Current consensus DPS estimate is 17.5, implying a prospective dividend yield of 5.2%. Current consensus EPS estimate suggests the PER is 10.6.

This company reports in USD. All estimates have been converted into AUD by FNArena at present FX values.Market Sentiment: 1.0All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources