Section 1: Company Overview and Fundamentals Insights

1.1 Company Overview

Aurizon Holdings Limited (ASX: AZJ) is a rail freight operator, and it offers integrated freight and logistics solutions via rail and road networks in Australia.

1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~22.79% of the total shareholding. The Vanguard Group, Inc. and State Street Global Advisors Australia Ltd. are holding a maximum stake in the company at ~5.00% and ~3.19%, respectively.

1.4 Key Metrics: The company reported a high gross margin in FY22 of 74.9%, compared to the industry median of 31.0%. Further, AZJ reported a high return on equity of 11.8% in FY22 relative to the industry median of 5.1%. Below is captured the trend of the debt-to-equity ratio and total revenue:

Section 2: Business Updates, Financial and Operational Highlights

2.1 Recent Updates:

2.2 Results Highlights of FY22: During FY22, the underlying net profit after tax (NPAT) was around AUD525mn while the statutory NPAT declined by 15% to AUD 513mn, because of one-off benefits recorded in FY21 that was tax benefit from the sale of interest in Aquila and transaction costs for the acquisition of One Rail Australia (ORA) initiated in FY22.

2.3 Growth Outlook: The acquisition of One Rail could help AZJ in the transformation of Aurizon platform for future growth and provide exposure to new economy and commodities. Further, the company remains on track to attain net-zero operational emission by 2050 which can be achieved by fleet decarbonization program, hydrogen powered solutions for freight and use of renewable power.

2.4 Dividend History: The company’s board declared the final dividend of 10.9 cents per share, fully franked, depicted a dividend payout ratio of 75% of underlying NPAT.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary

4.2 Fundamental Valuation

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is December 1, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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