Mineral Resources shares: After a year of outperformance (up 45%), is it still a buy?

Is this a good time to invest in the miner?

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Key points

  • Mineral Resources has outperformed the ASX market, with a 45% share price increase over the past year, compared to a flat ASX 200 Index.
  • The company's management reassures investors with strategic capital allocation and a $1 billion liquidity buffer, aiming to mitigate commodity volatility and enable growth opportunities.
  • UBS gives Mineral Resources a neutral rating, with a 12-month price target of $52.60, highlighting potential share price growth and indicating no expected dividend in FY26.

The ASX mining share Mineral Resources Ltd (ASX: MIN) has delivered incredible performance. It has risen 45% in the past year, significantly outperforming the ASX share market. In the past 12 months, the S&P/ASX 200 Index (ASX: XJO) is virtually flat.

Mineral Resources is involved in multiple areas of the mining industry, including mining services, lithium mining, and iron ore mining.

After going through significant volatility over the last two years, the company's valuation is now recovering strongly, as the chart below shows.

With the Mineral Resources share price on a good trajectory, it's good to ask whether it can continue climbing.

Is this a good time to invest in Mineral Resources shares?

The company recently held its annual general meeting (AGM), which gives investors the chance to hear from management and decide if they like the company's plans.

Broker UBS said that the AGM provided confidence in the strategy and capital allocation framework.

UBS noted that the business now has a $1 billion liquidity buffer, which has increased from $400 million. The business will have at least $400 million of cash at all times to protect the company from commodity price volatility while enabling capacity for countercyclical opportunities.

The broker pointed out that the company's debt leverage target has been revised to a net debt metric, rather than a gross debt measure previously, aligning with industry standards and not punishing the business for holding cash, especially considering the liquidity buffer. The ratio is now 2x net debt to EBITDA.

Mineral Resources has also tweaked its dividend policy for owners of Mineral Resources shares. The dividend payout ratio will be up to 50% of underlying net profit after tax (NPAT), though dividends will only be paid if liquidity and leverage thresholds are met, or if there is a clear line of sight to meeting them within 12 to 18 months.

UBS forecasts that net debt leverage will be comfortably less than 2 times by December 2026. The broker wonders whether dividends could resume in the 2026 results.

UBS also notes that with Mineral Resources' growth capital, it must satisfy a threshold of a 20% return on invested capital (ROIC) after tax.

The broker is confident the ASX mining share will continue to implement the external governance reviews' reforms.

Investment rating on the ASX mining share

UBS has a neutral rating on Mineral Resources shares, with a price target of $52.60. That's where the broker thinks the share price will be in 12 months from now. Therefore, the broker is suggesting the Mineral Resources share price could rise by more than 7%.

At this stage, the broker is not forecasting that a dividend will be paid in FY26.  

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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