Top broker Morgan Stanley reckons ASX mining share Mineral Resources Ltd (ASX: MIN) is going to rally big-time despite the company's full-year FY24 results released yesterday, causing a share price plunge.
The ASX mining share is swapping hands for $40.32 at the time of writing, down 0.7% for the day.
Yesterday, the Mineral Resources share price finished the session 7.46% lower at $40.61. During trading, the mining stock hit a new 52-week low of $38.82 per share.
This was a clear signal that ASX investors were not happy with the miner's full-year numbers.
Four brokers, including Morgan Stanley, have responded to the results by downgrading their 12-month price targets on Mineral Resources shares today.
Let's examine those numbers.
Brokers cut price targets on ASX mining share
The most interesting thing about these price target cuts is that all of them leave room for a potential uplift. That means all four brokers believe the Mineral Resources share price will rally from here.
Among the four brokers, Morgan Stanley is the most bullish in terms of share price predictions.
Although it has cut its price target on the ASX mining share by 11% to $70 per share, this still implies a potential uplift of 75% for investors who buy Mineral Resources today.
Citi has cut its price target by 8.3% to $55 per share, implying a potential 37.5% upside.
Morgans has cut its price target by 21% to $53 per share, implying a possible 32.5% uplift for today's buyers.
However, Macquarie is nowhere near as confident in the ASX mining share.
Macquarie has cut its 12-month price target on Mineral Resources by 20% to $48 per share. That still leaves room for a potential uplift of 20% but that's obviously not as alluring as the other brokers' tips.
Here's what Morgan Stanley says
Morgan Stanley analyst Rahul Anand said Mineral Resources' balance sheet at the end of FY24 was worse than expected.
Anand noted that the company's cash generation was slowing, which would limit opportunities to reduce debt in FY25.
However, the analyst said Mineral Resources probably would not need a capital raise.
Anand added:
For Mineral Resources to draw down its available A$800 million revolving facility completely in FY 2025, Morgan Stanley suggests iron ore prices would need to drop to US$70/ton and spodumene to US$550/ton simultaneously, which is 25% downside protection.
Recap of Mineral Resources' FY24 results
Mineral Resources reported a 10% increase in revenue to $5.28 billion but a 79% dive in underlying net profit after tax (NPAT) to $158 million.
Underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) came in at $1.06 billion, down 40% year over year.
The final blow to investors was the revelation that no final dividend would be paid. (The company paid a fully franked interim dividend of 20 cents per share for 1H FY24.)
Managing director Chris Ellison said that given the stubborn lithium price and the remaining investment required for the Onslow Iron Project, the company would defer expansion projects and focus on cost reduction and cash preservation in FY25.
What are other ASX mining shares doing today?
The BHP Group Ltd (ASX: BHP) share price is $40.76, up 0.56%.
Fortescue Ltd (ASX: FMG) shares are down 1.02% to $18.37 apiece.
Rio Tinto Ltd (ASX: RIO) shares are up 1.15% to $111.25.
