Wesfarmers: Lithium is about to come online

About the author:

Author name:

By Alex Lu

Job title:

Analyst

Date posted:

28 August 2023, 7:30 AM

Sectors Covered:

Industrials

• 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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