It's been a strong year for ASX materials shares.
The S&P/ASX 200 Materials (ASX:XMJ) index has climbed more than 12% in the last 12 months, and 23% since yearly lows in April.
Three in particular that have raced ahead in the past 12 months have been:
- Fortescue Ltd (ASX: FMG) is up 12.85%
- Develop Global Ltd (ASX: DVP) has climbed almost 70%
- Evolution Mining Ltd (ASX: EVN) has risen 145%
However after a strong rise, broker Bell Potter believes two are a buy while one is a sell high candidate.
Buy or Sell?
Fortescue closed last week at $18.80. Bell Potter currently has a "sell" recommendation and price target of $17.05.
This indicates a fall of just over 9%.
The broker downgraded it to a sell late last month with a reduced NPV-based target price of $17.05/sh, citing expected declines in iron ore prices, earnings, and dividends despite strong operational performance. Their valuation reflects core hub production, upcoming projects, Fortescue Zero, and energy costs.
On the flip side, Bell Potter has upgraded its guidance on Evolution Mining shares.
It upgraded the ASX materials shares from Hold to Buy, with a target price increase of 29%, from $8.15/sh to $10.55/sh.
Based on last week's closing price of $9.90, the new target price indicates an upside of 6.57%.
The broker said Evolution Mining is now past its CAPEX peak and positioned to deliver increasing free cash flow and higher returns to shareholders via its unhedged gold production base. Copper adds another potential leg to Evolution Mining's share price upside.
EVN is targeting FY25 production 710koz-780koz of gold and 70kt-80kt of copper, at AISC of A$1,475 – A$1,575/oz. It is effectively unhedged, offering leveraged gold and copper exposure. It has a strong balance sheet and paid dividends consistently since FY13.
Lastly, the broker also has a "buy" rating on Develop Global shares.
The mineral exploration and development company closed last week trading at $3.62 per share.
Bell Potter has a price target of $5.30 on this ASX materials share.
This indicates an upside of 46.4%.
Back in July, the broker said this outlook was predominantly driven by an expansion of Mine Life assumptions at Woodlawn project in NSW and Sulphur Springs project in WA.
We also lower the risk discount applied to our Sulphur Springs unrisked valuation (from 20% to 10%) to reflect recent milestone achievements: partial project financing; and development commencement.
