Continuing their analysis of the mining industry, Citi Research updated their rating for Australian diversified miner South32 (ASX:S32) from ‘neutral’ to ‘buy’.

Citi, anticipating a target price of A$3.80, expects a rebound in South32’s share price after experiencing recent lows, as current key spot commodity prices have substantially exceeded the market’s expectations for FY24.

There was a significant reduction in the company’s EPS estimate after the release of their FY24 cost forecast, according to the brokerage.

However, Citi argues that with a rise in coking coal and alumina prices, the subsequent adjustment for consensus EPS estimate will likely be upward.

Citi further points out that South32 has the highest operating leverage among diversified miners.

The stock is rated as ‘buy’ or higher by 10 out of 15 analysts, while 5 maintain a ‘hold’; the median PT as per LSEG data is A$4.08.

At the last close, the stock was down by 18.3% YTD.

South32 is a diversified mining company that operates globally with a significant presence in Australia.