Mineral Resources Ltd (ASX: MIN) shares have had a very tough week.
Although they rebounded on Thursday, they still remain down by 25% in the space of a just a week.
Things are even worse on a 12-month basis, with the mining and mining services company's shares down 56% over the period.
Is this a buying opportunity for investors? Let's see what analysts at Bell Potter are saying for this struggler.
What is the broker saying about Mineral Resources?
Bell Potter notes that Mineral Resources delivered a first half results ahead of its expectations. It said:
Underlying EBITDA was $308m vs BPe $229m, the beat was driven by increased EBITDA margins in Mining Services ($2.6/t, up 18%). Underlying NPAT was -$196m vs BPe -$238m, the beat due to a reduction in central costs ($50m).
One of the reasons that Mineral Resources shares have been sold off is its sky high debt levels. Its results revealed that net debt increased $656 million to $5.1 billion. Another reason was concerns over the ramp up of the Onslow haul road, which will be important to deleveraging the balance sheet.
Bell Potter has been looking into both and doesn't appear concerned. It said:
MIN sold off 21% on the 1H announcement due to: the high net-debt, the disclosures creating doubt that Onslow's haul road will be ramped-up successfully, which is pivotal to deleveraging the balance sheet, and in response to analyst questioning, MD Chris Ellison responded that he would support the incoming Chair / Board if they elected to raise capital to deleverage the balance sheet.
We continue to hold the view that (1) Onslow will be commissioned successfully, despite the normal challenges associated with large scale project development, (2) associated Iron Ore and Mining Services volumes will enable deleveraging of the balance sheet, and (3) MIN has other options to manage its debt, including re-financing, starting in May-2026.
Are Mineral Resources shares a buy?
According to the note, the broker has reaffirmed its buy rating with a reduced price target of $39.50 (from $59.60).
Based on its current share price of $25.83, this implies potential upside of approximately 53% for investors over the next 12 months.
To put that into context, if Mineral Resources' shares were to rise to that level, it would turn a $10,000 investment into approximately $15,300.
All in all, this could make this beaten down ASX 200 stock one to consider if you're looking for mining sector exposure and have a high tolerance for risk.
