Fund manager L1 Capital has picked out a hidden ASX mining tech stock that could be an opportunity due to its growth potential. That stock is Imdex Limited (ASX: IMD), a company that many investors may not have come across before.
Imdex shares have performed very well over the last three weeks, rising by around 25%, as we can see on the chart below.
L1 Capital describes Imdex as a global leader in mining exploration drilling technology.
Imdex itself says it develops cloud-connected sensors and drilling optimisation products to improve the process of identifying and extracting mineral resources for drilling contractors and resource companies globally.
Imdex managing director Bernie Ridgeway once described the company like this:
Our diverse portfolio of products and technologies let drillers and resource companies know what is going on below the ground as accurately and quickly as possible. It is this intelligence that enhances the efficiency and profitability of their operations at all stages of exploration, development and mining.
Why does L1 like this ASX mining tech stock?
The fund manager says Imdex is leveraged to increased mining exploration spending, which "has recently started recovery".
The company also recently acquired the number two player in the space, Devico, which will accelerate Imdex's global growth strategy.
L1 also highlighted the fact that growth is "further supported by the expected launch of the industry's best suite of new products."
But for me, one of the main attractions of this ASX mining tech stock is that the Imdex share price has fallen substantially in the last several months. It's down by around 33% since the 52-week high seen in January 2023.
That decline in valuation has occurred despite the company demonstrating ongoing profit growth. Imdex grew its earnings before interest, tax, depreciation and amortisation (EBITDA) every year between FY20 and FY23, and EBITDA rose 118% between FY19 to FY23's $114.1 million. An extra $8.5 million of EBITDA from the acquired Devico brought FY23 EBITDA to $122.6 million.
What is the Imdex share price valuation?
According to Commsec projections, Imdex could generate 11.2 cents of earnings per share (EPS) in FY24, and 12.7 cents of EPS in FY25.
That would put the company at 16x FY24's estimated earnings and under 14x FY25's estimated earnings.
Despite the short-term pain for the ASX mining tech stock, its share price has increased 36% over the last five years.
