Aurizon: Recovering Haulage Volumes and Shares Remain Undervalued

Narrow-moat-rated Aurizon screens as undervalued, trading at a 25% discount to our unchanged AUD 4.70 fair value estimate. It trades on a forecast fiscal 2024 P/E ratio of 15, offers a mostly franked yield of 5%, and has a solid medium-term earnings growth outlook. Management guides to underlying EBITDA of AUD 1.59 billion to AUD 1.68 billion in fiscal 2024, representing a 14% uplift at the midpoint. This guidance was reconfirmed at the annual general meeting in October. We expect solid growth to continue for the medium term and forecast an EBITDA CAGR of 7% in the next five years.