The Nickel Mines Ltd (ASX: NIC) share price has been on a bit of a rollercoaster ride in recent weeks.
Since this time last month, the nickel producer's shares have been as high as $1.79 and a low as $1.15.
The Nickel Mines share price is currently trading close to the middle of this range at $1.34.
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Is the Nickel Mines share price good value?
According to a note out of Bell Potter, its analysts see a lot of value in the Nickel Mines share price at the current level.
The note reveals that the broker has retained its buy rating and lifted its price target to $1.88.
This implies potential upside of 40% for investors over the next 12 months. And if you include the almost 5% dividend yield the broker expects in FY 2022, the total potential return stretches to 45%.
What did the broker say?
Bell Potter notes that PT Oracle Nickel Industry (ONI), the operating entity housing the Oracle Nickel RKEF project, has been granted material corporate tax relief.
Based on the broker's current modelled assumptions for the Oracle Nickel project, it expects the main tax concession to eliminate an expense of ~US$50m per annum for ten years. It notes that "this flows directly through to the bottom line and to free cash flow, boosting earnings and our NPV-based valuation."
Combined with a recent pullback in the Nickel Mines share price, the broker believes this is a buying opportunity for investors.
It commented: "We view NIC's steep price drop as an acquisition opportunity. The operating and development fundamentals of the business are unchanged and we view the perceived risk increase as tangential to NIC. We lower our CY22 and CY23 earnings forecasts by 15% and 9%, respectively, on higher costs, but continue to forecast aggressive EPS growth. Our target price increases by 7%, to $1.88/sh as we factor in the latest tax concessions. We retain our Buy recommendation."
