Wesfarmers: Lithium is about to come online

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Alex Lu
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By Alex Lu
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Date posted:
28 August 2023, 7:30 AM
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  • Wesfarmers' (ASX:WES) FY23 result was marginally above our forecasts and in line with Bloomberg consensus.
  • Key positives: Kmart Group and Officeworks earnings were ahead of our forecasts; Operating cash flow was up 82%; FY23 DPS of 191cps was comfortably above our forecast (179cps) and Bloomberg consensus (184.5cps).
  • Key negatives: Catch losses accelerated to -$163m vs -$88m in the prior year; Group EBIT margin fell 100bps to 8.9%.
  • Management’s outlook for the retail businesses was generally positive while WesCEF earnings (ex-lithium) are expected to fall significantly in FY24 due to lower ammonia prices and higher input gas costs.
  • We adjust FY24-26F group EBIT by between -2% and +3%, and underlying NPAT by between -3% and 2%.
  • Our target price falls slightly to (login to view) and we maintain our Add rating.

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