On Friday, RBC Capital Markets adjusted its financial outlook on Sandfire Resources NL (SFR:AU) (OTC: SNDFY), reducing the price target to AUD10.50 from the previous AUD11.00. Despite this change, the firm maintains an Outperform rating on the stock.
The decision to lower the price target follows recent developments at Sandfire Resources, with the Motheo project continuing to surpass expectations. Motheo is projected to contribute to a 10-12% growth in copper equivalent production by the fiscal year 2025. RBC anticipates that the company will exceed its production guidance, adding to the positive outlook.
Conversely, operational challenges at the MATSA facility have resulted in downward revisions for production estimates for the fiscal years 2024 and 2025. RBC expects that ore grades at MATSA will return to normal levels during the first half of 2025.
Despite these issues, the forecast for strong free cash flow (FCF) generation remains intact. Analysts believe this will lead to a continued reduction in net debt throughout fiscal year 2025.
The revised financial models indicate a slight decrease in expected earnings before interest, taxes, depreciation, and amortization (EBITDA) for the company, with a 1% reduction for fiscal year 2024 and a 7% reduction for fiscal year 2025. Consequently, the price target has been adjusted downward by 50 cents to AUD10.50 per share.
RBC also commented on the current dip in the copper market, viewing it as an opportunity for investors. The firm reiterates its Outperform rating, signaling confidence in Sandfire Resources' potential for growth and value creation over the medium term.
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