Section 1: Company Overview and Fundamental Insights

1.1 Company Overview: South32 Limited (ASX: S32) is a diversified mining and metal production group, which includes alumina, aluminium, bauxite, energy coal, metallurgical coal, manganese ore, manganese alloy, nickel, silver, lead, and zinc. Kalkine’s Global Fully Charged Report covers the Investment Highlights, Management Insights, Key Financial Metrics, Risks, Technical Analysis along with the Valuation, Target Price, and Recommendation on the stock.

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

1.3 Top 10 Shareholders:

The top 10 shareholders together form ~25.68% of the total shareholding. The Vanguard Group, Inc. and Schroder Investment Management Ltd. (SIM) holds a maximum stake in the company at ~5.17% and ~4.99%, respectively.

1.4 Key Metrics: In 1HFY23, S32 recorded quick ratio of 1.40x, compared to the industry median of 1.37x. Debt-to-equity ratio for the period stood at 0.18x, lower than the industry median figure of 0.19x. Below plotted the net margin and return on equity trend.

Section 2: Business Updates and Financial Highlights

2.1 Business Update

2.2 Results Highlights of 3QFY23 and 9MYTD (For the Period Ended 31 March 2023):  

2.3 Historical Financial Trend: Free cash flow from operations (excluding capital expenditure) stood at USD 483mn. Working capital build-up was USD 152mn owing to one-off increase related to the higher inventory positions and Brazil Aluminium restart. Liquidity position stood high with USD 1.6bn cash on hand and revolving credit facility of USD 1.4bn

Section 3: Risk and Future Prospects

3.1 Key Risks and Outlook

Section 4: Valuation, Stock Recommendation Summary, Technical Table, and Price Chart

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 23 May 2023. 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.