This report is an updated version of the report published on the 20^th of April 2022 at 3:51 PM GMT.

29Metals Limited (ASX: 29M)

29Metals Limited operates as a mining company with a focus on copper and precious metals. Its portfolio includes regional tenement interests surrounding Capricorn Copper and Golden Grove, and a project in Redhill located in Chile. It holds a market capitalization of $1.49 billion as of April 20, 2022.

Recent Business Updates: On March 11, 2022, 29M announced JORC combined mineral resources estimate reaching 123.4MT, with contained metal estimates of 2.1MT copper, 1.3MoZ gold, 2.6MT zinc, and 75MoZ silver. Similarly, the combined reserves estimate reached 25.3Mt as of December 31, 2021. On March 10, 2022, 29M ceased to have a technical interest in its own shares due to the expiry of voluntary escrow arrangements entered during IPO. Effective from March 21, 2022, 29M was added to S&P/ASX 300 Index.

FY21 Snapshot: Revenue surged 38% to $601 million driven by fovorable commodity prices. Its FY21 pro forma EBITDA of $254 million far exceeds pro forma forecasts of $221 million. It had posted an NPAT of $121 million in FY21 versus a nil NPAT posted in the prior year. It had refinanced debt and net drawn debt drastically reduced from $113 million as of December 31, 2020, to $3 million as of December 31, 2021.

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

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of 29M delivered 3-month gains of ~+7.26%. The stock hit a new 52-week high price of $3.30 on April 20, 2022. The stock of 29M has been valued using the P/E-based illustrative relative valuation method and arrived at a target price with a correction of high single-digit (in % terms). The company might trade at a slight discount from its peers, considering the rising inflation and volatile commodity risks due to the ongoing Ukraine and Russia war which may affect the profitability. For this purpose of valuation, a few peers like IGO Ltd. (ASX: IGO), Capricorn Metals Ltd. (ASX: CMM), Strandline Resources Ltd. (ASX: STA), and others have been considered. Considering the recent rally in share price, valuation indicating downside, inadequate profitability track record, and associated key business risks, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $3.295 as of April 20, 2022, at 01:22 PM (GMT+10), Sydney, Eastern Australia.

29M Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided.

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