Evolution Mining Limited (ASX: EVN)

Evolution Mining Limited is an Australian based gold mining entity that owns five wholly owned mines.

Investment Rationale – SELL at AUD 3.530

• Profit Booking: EVN’s stock price has surpassed the R1 level suggested in the previous report published on 28 February 2023. However, it is facing resistance as gold prices are under pressure from a firmer dollar. Therefore, it is presenting a profit booking opportunity.
• Dividend Decline: In H1 FY23, interim dividend declined 33% YoY, showed an impacted of decreased EBITDA margin and increased gearing.
• Overvalued Multiples: On a 12-month forward basis, key trading multiples (EV/Sales, EV/EBITDA, Price/Cash Flow, and Price/Earnings) are higher than the median for the Basic Materials sector.
• Technical Standpoint: The 14-day RSI (~67.47) is approaching an overbought zone. Thus, stock prices can face retracement in the short-term.
• Weaker Margins: In H1 FY23, gross margin and net margin were 20.5% and 8.9%. Both the profitability margins were significantly lower than the industry median.

Share Price Chart  

(Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY24E) (Illustrative)

Conclusion

Based on the notional gains, macroeconomic challenges, coupled with the unfavorable valuation conducted above, a "SELL" recommendation on Evolution Mining Limited has been given at the current market price of AUD 3.530 (as of 18 April 2023, at 11:59 AM GMT+10).

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 18 April 2023. 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.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/ or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the Australian Securities Exchange (ASX) and or REFINITIV. Typically, both sources (ASX and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.

Disclaimer

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