Mineral Resources Ltd (ASX: MIN) shares have more than tripled over the past year, but according to the team at Jarden, it's time to get out while the going's good.
In a note to their clients this week, cheekily titled "Use your illusion", Jarden analysts have said that while the company's recent quarterly results were "strong", they did not back up the strength in the share price.
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Hitting its targets
MinRes this week said it had achieved record quarterly iron ore production across its Onslow Iron and Pilbara Hub assets of 10.9 million wet metric tonnes (wmt), and record iron ore shipments of 11.4 million wmt.
The company stated that it was on track to meet its FY26 volume and cost guidance across all divisions, with Onslow Iron operating at its nameplate capacity of 35 million tonnes per annum between August and October.
The company said it had also been paid handsome prices for the lithium it produced, achieving a realised price of US$849 per tonne, up 31% from the prior quarter.
The company also recently said it would be paid a $200 million contingency payment for its Onslow haul road by Morgan Stanley Infrastructure Partners (MSIP) after hitting production targets.
Still overvalued
But all this has failed to impress the team at Jarden.
As they said:
Whilst we viewed the September quarter 205 production, pricing, and cost outcomes as a strong result, we were very surprised that the market added more than $1.1bn of market capitalisation. In contrast, our discounted cash flow-derived valuation, which continues to forensically hunt down the projected cash flow generation of the business, increased by about $120m ($0.60/share) to $15.60/share.
Compare this to the current share price of $47.45, and you can see why Jarden has a sell rating on MinRes shares.
With Minres trading more than 200% above our valuation … and no meaningful forecast free cash flow generation until FY29, we retain a sell rating. Key risks that may change our view include an accretive equity recapitalisation, and sustained strength in iron ore and lithium prices.
The Jarden team said a key weak point for the company was that another quarter had passed with no debt paid down, with MinRes' debt remaining at $5.4 billion.
MinRes is scheduled to hold its annual general meeting on 20 November.
Elsewhere, with regard to lithium shares, Jarden has a neutral rating on Pilbara Minerals Ltd (ASX: PLS) and an overweight rating on IGO Ltd (ASX: IGO).
