Analysts at Berenberg slightly lowered their target price on resources group Tharisa from 200.0p to 190.0p on Thursday, citing a mixture of higher royalties and FX-related headwinds.
Berenberg stated Tharisa, which reported first-half revenues of $314.0m, ahead of its estimates of $300.0m on better platinum group metals revenues, and an underlying earnings beat of $124.0m, remains “cheap” and offered “clear upside”, leading it to retain its ‘buy’ recommendation on the stock.
However, cash flow from operations of $105.0m was below its $112.0m estimate, driven mainly by a working capital build of $18.0m due to higher commodity prices.
The German bank noted this was offset by lower cash tax paid, which came in at $3.0m, below its $11.0m estimate, while capex of $39.0m was also below its $48.0m figure and cash flow from financing of $44.0m was slightly above its expectations for a print of $41.0m.
“We adjust our model for the H1 results; the company has generated meaningful profits and this has used up tax losses, which increases taxes and royalties as a result,” said Berenberg.
“While this results in a reduction to our EPS, we note that our price deck remains well below spot – offering mark-to-market upside. We remain upbeat on Tharisa and think that strong PGM prices have scope to drive sustained strong returns.”
