Berenberg raises target price on Petra Diamonds

Analysts at Berenberg raised their target price on diamond ming outfit Petra Diamonds from 107.0p to 130.0p on Wednesday, updating its model for the group following its full-year results.

Berenberg said Petra Diamonds' full-year results were in line with its expectations, with revenues of $585.0m, adjusted underlying earnings of $265.0m, and lower than expected unit costs at both its Finsch and Cullinan mines.

Costs at its Williamson and Koffiefontein mines, on the other hand, were above estimates, with the latter mine's operations continuing to track below internal expectations as it approaches the end of the mine plan in 2025.

Earnings per share of $0.36 per share also beat the analysts' estimates, while cash from operations of $283.0m was slightly below estimates due to a smaller release of working capital.

"We update our model for the results, including the new dividend policy and tender offer. The Tender 1 result increases our earnings estimates, while rolling our NAV calculation for FY23 improves our valuation due to lower net debt," said the analysts, who also retained their 'hold' rating on the stock.

"We remain cautious on Petra, as cash interest on the bond kicks in from FY24, which, coupled with rising capex, looks to increase net debt again. We expect a weaker Q1 operationally due to lower-than-expected grades at Cullinan and Finsch. In the near term, however, the stock may benefit from better sentiment. The stock trades on 0.77x NAV and 3.0x EBITDA."

Reporting by Iain Gilbert at Sharecast.com