Evolution Mining Limited

Section 1: Company Overview and Fundamentals

1.1 Company Overview:

Evolution Mining Limited (ASX: EVN) is a gold ore mining company that operates mining projects such as Cowal in New South Wales, Mungari in Western Australia, Mt Rawdon and Ernest Henry in Queensland, and Red Lake in Ontario, Canada.    

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

1.3 Top 10 Shareholders: The top 10 shareholders together form ~38.50% of the total shareholding. Van Eck Associates Corporation and AustralianSuper hold a maximum stake in the company at ~11.56% and ~10.87%, respectively.

1.4 Key Metrics: The company has reported a high EBITDA margin of around 43.3% in FY22 compared to the industry median of 40.1%. Further, the cash cycle days decreased in FY22 to 75.8 Days compared to 79.7 Days in FY21. Below is captured the trend of the total revenue and quick ratio:

Section 2: Business Updates, Financial and Operational Highlights

2.1 Recent Updates:

2.2 Insights of 1QFY23: During 1QFY23, the company produced copper of around 14,469t compared to 15,301t in 4QFY22, while it sold 14,239t copper in 1QFY23 relative to 15,728t in 4QFY22.

2.3 Growth Strategy: The sustaining capital is expected to be around AUD 190-240mn in FY23 and the same outlook for FY24. The guidance for FY23 major capital remains unchanged at AUD530-600mn, whereas the outlook for FY24 has decreased to AUD 330-380mn.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary:

4.2 Fundamental Valuation

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

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 November 22, 2022. 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.

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