Matt Murphy, an analyst from BMO Capital, has initiated a new Hold rating on Nexa Resources SA (NEXA).
Matt Murphy’s rating is based on several factors impacting Nexa Resources SA’s current and future performance. The company has faced difficulties in generating free cash flow due to weak smelting margins and challenges in ramping up operations at Aripuana, along with investments in tailings capacity at El Porvenir and Atacocha. Although there is an expectation for improved operating cash flow, the immediate focus remains on reducing debt, and the medium-term growth outlook is not particularly strong.
Despite these challenges, there are opportunities within Nexa’s portfolio, such as the potential for significant cash flow generation from Aripuana once it reaches full capacity by 2027-28. However, issues like tight zinc smelting margins, low share liquidity, and a relatively short reserve base compared to peers limit the stock’s upside potential in the near term. These factors contribute to the Hold rating, as the stock presents both risks and opportunities that balance each other out.
In another report released on April 9, Morgan Stanley also maintained a Hold rating on the stock with a $7.00 price target.