This report is an updated version of the report published on 30 September 2024 at 2:59 PM AEST.

Champion Iron Ltd (ASX: CIA)

Champion Iron Limited (ASX: CIA) is an ASX listed iron ore exploration and development entity with major projects in the Southern Labrador Trough, Canda’s largest source of iron ore. 

Recommendation Rationale - SELL at AUD 7.570

• Trading Around Resistance: CIA’s share price has surpassed the ‘Resistance 2’ level recommended on 29 August 2024; thus, share price can face resistance at the current levels.
• Technical Standpoint: Given that the 14-day RSI is currently around 77.91 level, indicating it is in the overbought zone and can face retracement in the short term.
• Revenue Decline: The quarterly revenue (Q4 FY24) of AU$333 million represented a 28% QoQ decrease compared to the same period last year, indicating a troubling downward trend.
• Impact of Railway Services: The ongoing issues with railway services have negatively affected shipments, leading to increased handling costs and complicated operations.
• Overvalued Multiples: On a forward 12-month basis – key valuation multiples (EV/EBITDA, Price/Earnings, Price/Cash Flow, and Price/Book) are higher than the median of Metals & Mining industry.

CIA Daily Chart

Valuation Methodology: Price/Earnings Approach (FY Mar'25E) (Illustrative)

CIA is likely to trade at a slight premium based on Bloom Lake Phase II expansion, completion of DRPF project, and development of green steel. The following peers have been considered for conducting valuation: Whitehaven Coal Ltd (ASX: WHC), Fortescue Ltd (ASX: FMG), and Rio Tinto Ltd (ASX: RIO).

Considering that the stock has surpassed its R2 level, market uncertainties, and risks associated, the share price can witness resistance at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current market price of AUD 7.570, as of 30 September 2024, at 10:05 AM AEST.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. 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 30 September 2024. 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: Dividend Yield may vary as per the stock price movement. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.