Every so often, the market gets it very wrong with the valuation of companies.
This means that investors can generate big returns if they identify undervalued shares before they re-rate.
With that in mind, it is worth pointing out that Bell Potter thinks that it has found a dirt cheap ASX 200 mining share.
In fact, it believes that this miner could generate mouth-watering gains and big dividend yields.
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Which ASX 200 mining share?
According to a note this week, the broker has reiterated its buy rating and $1.53 price target on Nickel Industries Ltd (ASX: NIC) shares.
Based on its current share price of 83 cents, this implies 84% upside for investors over the next 12 months.
In addition, the broker expecting a 5 cents per share dividend from the nickel miner in FY 2024 and FY 2025, which equates to a 6% dividend yield at today's price.
What did it say?
Bell Potter was impressed with the ASX 200 mining share's recent results release, noting that its net profit was higher than expected. It commented:
The result reflected record production and good cost control in an environment of materially lower nickel prices and higher input costs. Nickel tonnes sold increased by 90% but sales revenue was up just 54%. EBITDA increased by 21% and EBITDA margins dropped from 29% to 21% in a tough nickel market.
In light of its positive performance, the broker continues to believe that the miner trades with an "undemanding valuation" today. It concludes:
NIC is trading on undemanding valuation multiples, offers a supportive (unfranked) dividend, has demonstrated its ability to make money through the nickel price cycle and is one of the world's only listed nickel producer that offers diversified exposure across nickel products and markets. We retain our Buy recommendation.
