Orica Ltd (ASX: ORI)
Interested in your opinion
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Answer
Hi Phil,
This global mining services company, which provides commercial explosives, blasting systems, mining chemicals and digital technologies to the resources and infrastructure sectors, has underperformed the ASX in 2026, slipping ~10% YTD. ORI’s weakness has been disappointing with the stock failing to participate in a strong year for the broader Materials sector.
- The key turning point came in March, when ORI flagged only modest 1H EBIT growth and additional restructuring costs, triggering earnings downgrades and a sharp de-rating.
This was compounded by disruption at CF Industries’ Yazoo City ammonium nitrate plant, which forced Orica to source product elsewhere at higher cost. While the settlement of its A$170m dispute with CF Industries removed a legal overhang and strong gold-sector demand has supported underlying volumes, these positives have struggled to offset concerns around costs, supply-chain reliability and execution.
Interestingly, earnings expectations have actually improved as the year has progressed, with forward EPS estimates rising ~16% from A$1.21 to A$1.40. The problem has been valuation: ORI’s forward P/E has compressed from ~19.4x at the start of 2026 to around 16x today, more than offsetting the earnings upgrades.
- The market also appears cautious around ORI’s new Hunter Valley Hydrogen Hub, which requires A$245–283m of net capex through 2029.
With ORI’s weakness has become a story of multiple compression rather than deteriorating earnings, presenting a potentially interesting setup if execution improves and the market becomes more comfortable paying a higher multiple for its earnings recovery.
- We like the risk/reward around $22 but not enough to press the “Buy Button” yet.
