Zimplats Holdings Ltd (ASX: ZIM)

Zimplats Holdings Limited is a platinum mining company based in Guernsey. It is engaged in producing platinum group metals (PGM) and associated metals, such as nickel, gold, copper, cobalt, and silver mined from the Great Dyke in Zimbabwe.

Investment Rationale – SELL at AUD 26.61

• Financial Decline: In H1 FY23, revenue and profit before income tax fell 7% and 15%, respectively.
• Quarterly Cost Increase: In Q3 FY23, cash costs increased by 4% against Q3 FY22. The operating cost also increased by 16% YoY in Q3 FY23, primarily due to inflation.
• Overvalued Multiples: On a trailing 12–month basis – key trading multiples (EV/Sales, EV/EBITDA, Price/Earnings, Price/Book, and Price/Cash Flow) are higher than the median of the Basic Materials’ sector.
• Key Risks: The uncertainties related to weather related production issues, supply chain snags, cost inflation, and global economic slowdown can impact business performance.
• Technical Indication: The momentum oscillator, 14-day RSI (~72.95) is hovering around the overbought zone; and thus, price correction can be expected.

ZIM Daily Chart

 (Source: REFINITIV; Analysis by Kalkine Group)

Considering the risks associated and overvalued multiples, it is prudent to book profits at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the current price of AUD 26.61 (as of 20 July 2023, at 3:55 PM GMT+10).

Note: This report may be updated with details around fundamental and technical analysis, price/ chart in due course, as appropriate.

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 20 July 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: Dividend Yield may vary as per the stock price movement. 

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