Fortescue Ltd

FMG: XASX (AUS)

Morningstar Rating for Stocks	Fair Value	Economic Moat	Capital Allocation
	A$42.30	Thbr	Pjpkwzvr

Fortescue Reports a Strong Fiscal Q2 2023, Retaining FVE of AUD 15

Jon Mills

Jan 27, 2023

We retain our AUD 15 fair value estimate for no-moat Fortescue, with shares trading at a 50% premium to fair value. We think this partly reflects current iron ore prices, which remain elevated compared to the cost curve, and which have risen recently due to expectations of rising demand from China as it reopens after abandoning its zero-COVID-19 policy. We also think enthusiasm over Fortescue’s bold green energy ambitions is another driver of the premium. Yet green energy is an expensive and capital-intensive space, so we remain more circumspect. In our view, iron ore will remain the main driver of Fortescue’s earnings for the foreseeable future.

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