KMR: Long-Term Ore Zone Shift Will Support Future Cash Generation

The analyst price target for Kenmare Resources has been lowered from approximately £3.30 to £3.00 per share as analysts factor in softer revenue growth assumptions and a slightly higher discount rate, partly offset by a modestly improved profit margin outlook and a stable forward earnings multiple.

Analyst Commentary

Recent research updates show a pattern of gradual downward adjustments to the Kenmare Resources price target, with the latest move bringing it to 300 GBp from 330 GBp while retaining a neutral stance on the shares.

Bullish analysts highlight elements of operational stability and disciplined capital allocation, but bearish analysts remain focused on moderating growth expectations and valuation constraints.

Bullish Takeaways

• Bullish analysts see the narrowing of the price target cuts over time as an indication that most of the negative earnings revisions may already be reflected in the current valuation.
• Improved margin assumptions are viewed as supportive of cash generation, helping to underpin the revised 300 GBp target despite softer top line expectations.
• The decision to maintain a steady earnings multiple suggests confidence that Kenmare Resources can execute against its medium term production and cost guidance.
• Stable ratings, even alongside lower targets, imply that downside risk is seen as more limited from here, providing a valuation floor if execution remains on track.

Bearish Takeaways

• Bearish analysts point to the repeated downward resets from 370 GBp to 330 GBp and now 300 GBp as evidence of persistent pressure on growth assumptions and commodity price expectations.
• A slightly higher discount rate signals increased perceived risk in the outlook, which weighs on the net present value of future cash flows and caps upside potential.
• The continued use of a Hold rating, rather than a move to a more constructive stance, reflects concerns that near term catalysts may be insufficient to drive a material re rating.
• Expectations for only modest revenue growth, even with better margins, raise questions about the sustainability of higher returns and limit the scope for multiple expansion.

What's in the News

• Updated 2025 guidance now points to lower ilmenite and rutile output, while zircon and concentrate production ranges remain unchanged, signalling a more conservative near term volume outlook (Corporate Guidance).
• Kenmare reports that the major upgrade of its largest mining unit, WCP A, is largely complete and capable of nameplate throughput. However, tailings management constraints are still limiting consistent full capacity, with some optimisation work likely to extend into 2026 (Product Related Announcement).
• The company confirms that WCP A will transition from Namalope to the Nataka ore zone from late second quarter 2026. This move is expected to secure over 20 years of production under a capital plan budgeted at approximately $341 million (Business Expansion).
• Third quarter 2025 operating results from the Moma mine show lower excavated ore, heavy mineral concentrate, and ilmenite, zircon and rutile volumes compared with the prior year. This underlines current production headwinds during the upgrade and ramp up period (Operating Results Announcement).

Valuation Changes

• The fair value estimate has fallen moderately, moving from roughly 5.51 to 5.20 in the model and reflecting lower embedded growth assumptions.
• The discount rate has risen slightly, increasing from about 9.48 percent to 9.73 percent and indicating a modest uptick in perceived risk or required return.
• Revenue growth has fallen significantly, with the long-term assumption reduced from around 3.66 percent to close to 0.14 percent, which points to a much more conservative top-line outlook.
• The net profit margin has risen slightly, improving from approximately 15.68 percent to 16.40 percent and partly offsetting weaker revenue growth in the valuation.
• The future P/E has risen marginally, edging up from about 11.63x to 11.86x and suggesting only a small change in the market multiple applied to forward earnings.