AU : ALS Limited - Building from a strong base

FY21 underlying NPAT beat market expectations by ~5%, driven by 2H margin expansion as ALQ continues to astutely manage costs/capacity. ALQ expects strong operating leverage to improving 1H22 volumes to offset the cost of adding new capacity and labour constraints in Geochem. We lift our FY22-24 EPS forecasts by 4-11% driven predominantly by a lift in assumed Commodities margins close to 30% reflecting the sector outlook. Our blended valuation adjusts to A$11.56ps (from A$10.35) but we downgrade to Hold after ALQ’s strong run.

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