Iluka Resources (ASX:ILU) Valuation Review Following Profit Decline, Dividend Cut, and Production Suspension

If you’ve been keeping an eye on Iluka Resources (ASX:ILU) lately, you’re probably debating what these big moves mean for your portfolio. The company’s 31% net profit drop for the first half of 2025, paired with a halved interim dividend and the temporary halt of mineral sands production at one of its Australian sites, is turning plenty of heads. With mineral sands prices under pressure and Iluka pivoting operations, investors are asking if this is a warning sign or a shake-up that sets up future growth.

After a shaky year marked by profit declines and operational tweaks, Iluka’s share price has traveled a bumpy road. Despite rallying nearly 29% year to date and surging over 70% in the past three months, the stock still lags behind its level from a year ago. Its three-year record sits in negative territory. This mix of short-term recovery and longer-term disappointment underscores the debate about whether the recent momentum reflects optimism about a turnaround or just a market reaction to shifting risks.

So with steady gains this year, is Iluka undervalued after a tough stretch, or has the market already baked in hopes for a recovery?

Most Popular Narrative: 3.2% Overvalued

The most popular narrative suggests Iluka Resources is trading slightly above its fair value. Analysts point to evolving cost structures and project investments as key drivers behind current expectations.

"The development of the Eneabba rare earths refinery, with secured funding and progress in construction, positions Iluka for significant growth in the high-demand rare earth market. This could potentially boost future revenue streams. The anticipated commencement of the Balranald project will increase the supply of natural rutile and high-quality zircon, addressing existing supply constraints, and is expected to contribute positively to revenue and earnings once production begins."

Curious about the financial recipe fueling this valuation call? There is an intriguing blend of projected revenue growth, thinner margins, and an ambitious profit multiple at play. What numbers are the analysts counting on, and how do bold expansion moves mix with cost-cutting plans? The real story is in the detailed projections driving this fair value. If you want the inside edge, keep digging.

Result: Fair Value of $6.40 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, rising Australian costs or unexpected inventory build-up could quickly erode Iluka’s margins and cast doubt on today's positive outlook.

Find out about the key risks to this Iluka Resources narrative.

Another View: What Do Multiples Suggest?

While the popular opinion is that Iluka trades above fair value, a look through our lens of price-to-earnings comparison hints that the company might actually be reasonably valued next to the wider industry. Could the market be missing something in plain sight?

See what the numbers say about this price — find out in our valuation breakdown.

Stay updated when valuation signals shift by adding Iluka Resources to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own Iluka Resources Narrative

If the story so far doesn't quite fit your perspective or you're keen on charting your own analysis, why not dive into the numbers yourself? You can quickly build an individual narrative in just a few minutes. Do it your way

A great starting point for your Iluka Resources research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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