There are plenty of options for investors to choose from in the mining sector.
But which ASX 200 mining stocks are buys and which are sells right now?
Let's see what analysts at Goldman Sachs are saying about a couple of popular miners.
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Sell this ASX 200 mining stock
As we covered here in greater detail, the broker believes that analysts should be selling Fortescue Ltd (ASX: FMG) shares right now.
This is due partly to its valuation compared to other miners. It commented:
The stock is trading at a premium to RIO & BHP on our estimates; ~1.2x NAV vs. BHP at ~0.85x NAV and RIO at ~0.75x NAV, ~6x NTM EV/EBITDA (vs. BHP/RIO on ~5.5x/4.5x), and ~1% FCF vs. BHP/RIO on c. 6%/7%. FMG continues to trade at a >10% premium to RIO & BHP on an EV/EBITDA basis, but at a >30% premium on a P/NAV basis, despite being less diversified and having a lower margin and FCF/t iron ore business.
Goldman has put a sell rating and $15.40 price target on the ASX 200 mining stock. This implies potential downside of 17% for investors over the next 12 months.
Buy this miner
Instead of Fortescue, the broker thinks investors should be buying South32 Ltd (ASX: S32) shares.
In response to its full year results, the broker retained its buy rating on the diversified miner's shares with a trimmed price target of $3.60 (from $3.70). Based on its current share price of $3.10, this implies potential upside of 16% between now and this time next year.
In addition, Goldman is forecasting a fully franked 4.6% dividend yield in FY 2025. This boosts the total potential return to almost 21%.
Why South32?
The broker likes South32 due to its exposure to metals that are in favour right now and look set to support strong free cash flow generation. It explains:
GS commodity team are bullish copper, aluminium, zinc and met coal (~90% of S32 FY25 EBITDA), and we forecast Cu Eq growth of ~5% in FY26 on recovering manganese, aluminium and copper volumes. On our forecasts, S32 is trading on a FCF yield of ~6-8% in FY25 & FY26 (excluding met coal sale proceeds).
And unlike Fortescue, Goldman feels that this ASX 200 mining stock is attractively priced. It adds:
Attractive valuation trading at ~0.8x NAV (A$3.73/sh), and an attractive NTM EV/EBITDA multiple of ~4x vs. the global sector average of ~5x.
