Now could be the opportune moment to invest in Orica Ltd (ASX: ORI) shares. This recommendation comes from Bell Potter, a leading brokerage firm, which has recently initiated coverage on this ASX 200 stock with a positive outlook.
Orica, a prominent solutions provider in the global mining and infrastructure markets, is known for manufacturing and supplying explosives, blasting systems, and speciality mining chemicals. Additionally, the company offers orebody intelligence and geotechnical and structural monitoring products and services.
Strategic Transformation of Orica
Bell Potter has highlighted Orica’s significant transformation over recent years, a change that the brokerage views favorably. According to Bell Potter, Orica has strategically pivoted through acquisitions, evolving into a more diversified product and service provider. This diversification includes the development of emerging Speciality Mining Chemicals (SMC) and Digital Solutions (DS) segments, which complement its traditional Blasting Solutions (BS) operations.
“ORI has undergone a strategic pivot in recent years, transforming the company (through acquisitions) into a more diversified product and service provider, with emerging Speciality Mining Chemicals (SMC) and Digital Solutions (DS) segments to complement legacy Blasting Solutions (BS) operations. ORI expect to deliver an 80% / 20% EBIT split for Blasting / Beyond Blasting in FY25, compared with 86% / 14% in FY23, with aspirations declared to reach parity (50% / 50%; no timeline announced).”
This strategic transformation positions Orica for substantial growth in the near term, particularly following its recent business update, which outlined continued positive momentum in the second half of FY25. Bell Potter expects this momentum to persist into FY26-27.
Potential for Market-Beating Returns
Bell Potter’s analysis suggests that Orica’s shares could yield attractive returns for investors over the next 12 months. The brokerage has initiated coverage with a buy rating and set a price target of $23.00. Given Orica’s current share price of $21.20, this target implies a potential upside of nearly 9%.
“ORI’s Sep’25 Business Update outlined a continuation of positive momentum in 2H FY25, leading the company to guide for higher earnings across the three segments compared with the PcP. Looking forward, we expect current operating momentum to continue in FY26-27.”
In addition to potential price appreciation, Bell Potter forecasts a dividend yield of 3% over the period, bringing the total potential return to approximately 12%.
Expert Insights and Future Prospects
Commenting on the buy recommendation, Bell Potter expressed confidence in Orica’s ability to grow its underlying EBIT across each segment in the short-to-medium term. The brokerage anticipates that Orica is well-positioned to achieve rapid de-leveraging over FY26-27, assuming no major mergers or acquisitions occur. This financial strategy is expected to prioritize increasing shareholder returns through an extension of the share buy-back program and dividends.
“We expect ORI to grow underlying EBIT across each segment in the short-to-medium term. ORI is well positioned to deliver rapid de-leveraging over FY26-27 (in the absence of M&A), with scope for capital management to prioritise increasing shareholder returns via an extension to the share buy-back program and dividends.”
The announcement comes as Orica continues to navigate a competitive market landscape, leveraging its diversified portfolio to capture new opportunities. As the company strives towards its goal of achieving a balanced EBIT split between Blasting and Beyond Blasting operations, investors are keenly watching for further developments.
As Orica progresses with its strategic initiatives, the investment community will be closely monitoring its performance metrics and market positioning. The company’s ability to execute its growth strategy effectively will be crucial in realizing the potential returns projected by Bell Potter.
In conclusion, Orica’s strategic transformation and promising growth prospects make it a compelling consideration for investors seeking exposure to the mining and infrastructure sectors. With Bell Potter’s endorsement and a robust business model, Orica stands poised for continued success in the coming years.
