Orica's (ASX:ORI) earnings growth in its Australia Pacific and Asia (APA) division will likely ease into the financial year 2026 due to slowing recontracting growth, investment and advisory group Jarden said in an Oct. 1 report.
"This could represent an overhang for the stock over the course of FY25E, with our FY26E EBIT/t estimate for APA falling 18% below consensus," wrote Jarden.
The investment group noted that even if ammonium nitrate capacity remains constrained, a further cycle of price hikes with customers is still unfeasible when combined with a potential increase in gas input cost.
Jarden's outlook on Orica's North American operations is also bleak amid an oversupply.
"With ORI's share price having appreciated +20.2% over the past year (earnings growth, acquisitions, market rotation into defensive industrials), we view the risk/reward symmetry for ORI as increasingly unattractive at the current share price level," Jarden wrote.
Jarden Research downgraded Orica's rating to neutral from overweight, while maintaining its price target at AU$18.50.
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