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UBS has downgraded South32 Ltd to Neutral from Buy, lowering the target price to £1.90 from £2.10, following a 20% outperformance over BHP in the past year. Despite improved operating performance and a solid balance sheet, growth prospects are tempered by long-term challenges at the Hermosa project and resource depletion at Cannington. Analysts noted that projected capital returns are less attractive, with a free cash flow yield below 5%, while revenue is expected to rise by 39% this financial year.
UBS has downgraded South32 from Buy to Neutral, lowering the target price to £1.90 from £2.10, following a strong performance against BHP. Despite a robust total return of 20.5% over the past year, analysts noted long-term growth challenges, particularly with the Hermosa project and resource depletion at Cannington. The company's current financial health remains solid, but projected cash returns are less attractive, with a free cash flow yield below the long-term average.
South32 has reaffirmed its production guidance for the 2025 financial year, with silver production exceeding forecasts by over 20% and up 86% quarter-on-quarter, despite facing higher raw material costs. The company's investment in American Eagle enhances its diversified asset base, positioning it as a strong portfolio stock with a target price of $4.35. However, skepticism remains regarding its financial performance, highlighted by flat earnings per share growth since 2016 and a trailing P/E ratio of 28, leading some to view the stock as overvalued.
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ubs downgrades south32 to neutral lowers target price to 1.90
08:18 21.03.2025
ubs downgrades south32 to neutral and lowers target price to 1.90
08:18 21.03.2025
south32 production update shows strong silver growth amid market challenges
05:22 20.01.2025
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