Mineral Resources Ltd (ASX: MIN) shares could offer big returns to investors that aren't averse to investing in the mining sector.
That's the view of analysts at Morgans, which have named the mining and mining services company as one of their top picks from this side of the market.
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Iron ore looking good
According to the note, the broker believes that iron ore has come out of its slump in great shape. It commented:
While the market remains concerned with comments from the Chinese government around capping steel output at 2022 levels, we note that those levels are quite healthy – particularly when coupled with iron ore supply risks. The pullback in Chinese steel production has not matched the level of market pessimism around China growth, with monthly steel production still around a solid base of 80mt.
China iron ore stockpiles at port remain at healthy levels, suggesting increased iron ore imports are being consumed. On the back of these evolving fundamentals, with iron ore prices demonstrating a higher watermark than we previously expected, we have upgraded our forecasts.
Mineral Resources share price could leap higher
Morgans sees a lot of value in Mineral Resources shares at the current level.
It has an add rating and $106.00 price target, which, based on its current share price of $84.31, implies potential upside of almost 26% for investors.
Making things even better, Morgans is expecting some big fully franked dividend yields in the near future. It estimates that its shares will provide yields of 4.4% in FY 2023 and 8% in FY 2024.
The broker explained why the company is its top pick right now:
MIN is our top pick amongst the iron ore sector, where we see growth from its Onslow Iron project as likely to increase materiality of iron ore to earnings. MIN's share price has 'shrugged off' the disappointing news around the recent gas appraisal well (Lockyer-2). Perhaps suggesting investors do not attribute material value to MIN's energy prospects (at least relative to the sell-side).
We continue to see MIN as a business that is over half way through a material transformation. Now delivering on its lithium growth objectives, and progressing construction of its Onslow Iron project, we expect MIN to grow group production at 10% CAGR over the next 3 years.
