This report is an updated version of the report published on 24 January 2023 at 3:58 PM AEDT.
Iluka Resources Limited (ASX: ILU)
Iluka Resources Limited (ASX: ILU) is a critical mineral entity involved in the exploration, development, mining, marketing, and rehabilitation of mineral sands primarily in Australia and the United States. Iluka's products are used in an array of applications including technology, construction, medical, lifestyle and industrial uses.
Recommendation Rationale – SELL at AUD 7.38
- Profit Booking: ILU’s share price has surpassed the resistance 1 level suggested on 10 January 2024, and offered a profit booking opportunity.
- Overvalued Multiples: On a forward 12-month basis, key trading multiples (EV/Sales, EV/EBITDA, Price/Earnings, and Price/Cash Flow) are higher than the median of Basic Materials’ sector.
- Quarterly Update: Total sales in FY23 declined 22% compared to FY22, while total production was 8.1% up year-on-year.
- Financial Decline: During H1 FY23, free cash flow and interim dividend declined by 116% and 88%, respectively.
ILU Daily Chart
Daily Technical Chart; Source: REFINITIV
Valuation Methodology: Price/Earnings Approach (FY June'24E) (Illustrative)
Today, the stock crossed its first resistance of AUD 7.238, but may face some resistance before scaling further upside. Given its current trading levels, recent rally in the share price, and risks associated, it is prudent to book profit at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 7.38, at 10:45 AM AEDT, as of 24 January 2024.
Note: This report may be updated with details around fundamental and technical analysis, price/ chart in due course, as appropriate.
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 24 January 2024. 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 downtrend may take a pause backed by demand or buying interest.
Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.