Best calls to action – Friday, 17 February

About the author:

Author name:

By Andrew Tang

Job title:

Analyst - Equity Strategy

Date posted:

17 February 2023, 6:00 AM

Sectors Covered:

Equity Strategy and Quant

Telstra Group (ASX:TLS) - Mobile won't be silenced

TLS's 1H23 result was broadly in line with expectations and full year guidance was reiterated, albeit with consumers buying less new mobile phone handsets. Mobile continues to deliver impressive results with key KPIs all pointing up. ADD retained, TP increased to (login to view).

Read our full reports and latest price targets on ASX:TLS here.

Sonic Healthcare (ASX:SHL) - 1H- in line- back in strong base business growth mode

1H underlying results were broadly inline, as slowing Covid-19 testing (-72%) impinged sales, compressed OPM and constrained OCF. The base business (ex-Covid) continues to perform well, with margins at pre-covid levels, while Imaging is also improving, but Clinical Services was softer on lower Covid-19-related services.

Importantly, Jan-23 saw the base business revenue up 10% on pre-covid levels, with Australia Pathology jumping 16% on the back of strength in the specialist/hospital referral channels and post-COVID-19 catch-ups.

While the lack of FY23 guidance reflects some uncertainty, a recovering base business, along with an improving cost structure and ample liquidity for capital management and M&A, suggests momentum is moving in the right direction. We have adjusted FY23-25 estimates and rolled forward valuation multiples, with our target price increasing to (login to view). Move to Add.

Read our full reports and latest price targets on ASX:SHL here.

South32 Limited (ASX:S32) - Solid H1 but cost pressure remains

Broad cost pressures remain for S32, but not as much as the market expected, with the company comfortably beating earnings expectations in 1H23.

Lower FX was a key driver for the beat, while some further moderation in cost pressures could help 2H23. S32 remains confident that the quantum of development capex for the Taylor's Deposit has not changed since its mid-2021 PFS.

We maintain our ADD rating and (login to view) target price.

Read our full reports and latest price targets on ASX:S32 here.

Super Retail (ASX:SUL) - 1H23 earnings: Whatever you invest in, make it super

SUL achieved 1H23 PBT growth of 36% to $218m on 15% higher sales. We have increased our EPS estimates by 4% in FY23 and 3% in FY24.

We reiterate our Add rating and increase our target price from (login to view).

Read our full reports and latest price targets on ASX:SUL here.

Orora Limited (ASX:ORA) - Continuing to optimise the business

ORA's 1H23 result was above our forecasts and Visible Alpha consensus. Divisional summary: Australasia EBIT -3% (-1% vs MorgansF) and North America EBIT +20% (+5% vs MorgansF).

Key positives: North America EBIT margin (+30bp to 4.9%) and ROFE (+220bp to 20.4%) both improved on the back of pricing disciplines and continued business optimisation gains; Demand for Cans was strong with double digit volume growth.

Key negatives: Free cash flow was down 41% due mainly to higher capex; Australasia EBIT margin (-380bp to 15.2%) and ROFE (-250bp to 23.0%) were lower; Wine and beer glass volumes were softer. Management has maintained guidance for FY23 earnings to be higher than FY22.

For FY23, we forecast EBIT to be up 8% to $308.4m. We adjust FY23/24/25F EBIT by +1%/0%/-1%.

Our target price increases slightly to (login to view) and with a 12-month forecast TSR of 18%, we upgrade our rating to Add (from Hold).

Read our full reports and latest price targets on ASX:ORA here.

Newcrest Mining (ASX:NCM) - 1HFY23: Strong 1H result with a dividend sweetener

Positive 1H FY23 result, with most segments ahead of consensus estimates. NCM board unanimously rejects Newmont's scrip offer. Declares a hefty dividend of US$0.35/share (inclusive of special dividend).

FY23 production and cost guidance maintained. Continues operational focus on gold, with plans to seek exposure to copper via existing assets. Target price remains unchanged at (login to view). With this note we transfer coverage to Sharad Bhat.

Read our full reports and latest price targets on ASX:NCM here.

Evolution Mining Ltd (ASX:EVN) - Soft 1H results but guidance unchanged

A busy first half for EVN, with earnings trailing estimates and a significant step up in growth capex. The lower earnings and higher capex led to a smaller than anticipated dividend. Importantly, unchanged FY23 production and AISC guidance suggests a strong H2.

We maintain our Add rating and (login to view) target price. With this note we transfer coverage to Sharad Bhat.

Read our full reports and latest price targets on ASX:EVN here.

Beacon Lighting Grp (ASX:BLX) - 1H23 earnings: Growth strategies still compelling

Sales exceeded expectations, although higher operating costs and lower gross margins resulted in 1H23 NPAT 6% below our estimate. We have reduced our FY23 and FY24 EPS forecasts by 1% and 2% respectively.

We retain an Add rating and (login to view) target price. On our estimates, BLX trades on an attractive 12x forward P/E with a fully franked dividend yield in excess of 4%.

Read our full reports and latest price targets on ASX:BLX here.

Find out more

You can find further detailed analysis of company results this reporting season by browsing our reporting season tag, and view a full list of upcoming results on our Reporting Season Calendar.

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Disclaimer: Analyst may own shares. The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.