The S&P/ASX 200 Index (ASX: XJO) mining stock Mineral Resources Ltd (ASX: MIN) suffered a painful reaction to its FY25 half-year result last week.
The company's two key commodities — iron ore and lithium — were both negatively impacted by price drops over the last 12 months, which led to a difficult HY25 report.
Mineral Resources reported that its revenue declined 9% to $2.3 billion, underlying operating profit (EBITDA) fell 55% to $302 million, underlying net profit sank 200% to a loss of $196 million and statutory net profit plunged 252% to $807 million.
The statutory net profit suffered $352 million of post-tax impairment charges, primarily related to Bald Hill and $232 million of post-tax translation impacts on foreign-currency-denominated balances.
According to reporting by the Australian Financial Review, broker Barrenjoey recently upgraded the ASX 200 mining stock to overweight, meaning a buy, saying the market sold off the business too heavily.
Barrenjoey suggested that the Mineral Resources share price sank 20% when it reported because the miner said the capital expenditure for its Onslow iron ore project will be $400 million higher and that there will be a three-month delay to reach its nameplate capacity (suggested project production capacity).
The broker suggested that the negative update should have led to a decline of around $630 million from the company's market capitalisation rather than the $1.2 billion hit the business actually took.
According to the AFR, Barrenjoey head of mining research Glyn Lawcock said:
We believe the market has overreacted and is now factoring in an Onslow outcome that is materially below company guidance.
In light of the FY25 half-year result and the Onslow news, Barrenjoey reduced its price target on Mineral Resources stock to $35, down from the former price target of $42. That's a decline of around 17%.
A price target is where a broker thinks a share price will be trading in 12 months from the time of the investment call. Therefore, Barrenjoey is suggesting the ASX 200 mining stock could rise by close to 30% in the next year.
Time will tell if the company is able to deliver on this expectation.
Following a period of heavy governance scrutiny, the Mineral Resources share price has sunk more than 60% since May 2024.
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