Aurizon: Volumes Recovering and Shares Attractive

Narrow-moat Aurizon remains attractively priced, trading at a 23% discount to our fair value estimate, on a forecast fiscal 2025 P/E ratio of 13 and a mostly franked dividend yield of 6.6%. We upgrade our fiscal 2024 EBITDA forecast by 2% to AUD 1.67 billion, toward the top of the AUD 1.59-AUD 1.68 billion guidance range on a slightly-better-than-expected rebound in coal export volumes. Longer-term forecasts are largely unchanged, and we maintain our AUD 4.70 per share fair value estimate. We lower our uncertainty rating to Medium from High, given a solid earnings recovery across haulage and the regulated rail track, as well as more comfort around the financial health of coal mining customers and the long-term outlook for Australian coal exports to Asia.