We recently researched Dyno Nobel (ASX:DNL) in The Dynamic Investor after the Company upgraded earnings (EBIT) guidance for the 12 months to 30 September 2026 (FY26). More importantly, the update highlighted that the Company has a clear long-dated growth strategy underpinned by attractive end market demand, transformation benefits and expansion in priority growth markets.

We assess whether these factors provide scope for further upside.

About Dyno Nobel

Dyno Nobel is a leading pure-play international explosives and blasting services company, having finalised its exit from the fertilisers business on 30 June 2026. DNL provides value-added products and services across the drill-and-blast value chain, serving customers across the metals and coal mining, quarrying and construction industries. The Company has global manufacturing capabilities, including 20 Company-owned plants and joint venture operations.

DNL was previously part of Incitec Pivot (‘IPL’), following IPL’s acquisition of Dyno Nobel in 2008. The explosives business subsequently operated as a core division of IPL for more than a decade, alongside the Company’s fertiliser operations. DNL was separated from IPL through the demerger of Incitec Pivot’s explosives business in 2024, becoming a separately listed company on the ASX.

Key Fundamental Drivers

FY28 EBIT Target on Track

DNL continues to target EBIT of $600m in FY28 through its Transformation Program (which has delivered ~$183m of benefits), followed by operational and growth initiatives. In context, EBIT guidance for FY26 was recently upgraded to $480-490m, from $460-500m.

Debottlenecking is a key factor underpinning expected EBIT growth over FY26–FY28. DNL is investing in low-capital, high-return projects to improve its cost position while meeting growing customer demand. More than 70Kt of ammonium nitrate (AN) capacity is expected to be added in North America, including 50Kt at Cheyenne within the next six months and a further 20Kt at Louisiana & Missouri) ahead of the 2028 peak season. The additional capacity should reduce DNL’s reliance on higher-cost third-party AN purchases during peak periods, supporting both volume growth and margin expansion.

Multiple Long-Term Growth Opportunities

DNL has outlined an aspirational EBIT target of $800m in FY31. This target includes another $200m of transformation benefits, but does not include any major Merger & Acquisitions. There are multiple growth drivers underpinning the long-term EBIT growth opportunity. Some of these include:

• Premium products and technology are expected to become a larger share of the business, rising from ~35% of revenue to ~45% by FY31. This is expected to improve revenue quality because premium products carry margins ~1.2x of standard products and are tied to measurable customer productivity gains.
• The commodity mix is expected to shift toward higher-value metals and critical minerals, with metals rising from ~36% of revenue in FY23 to just over 50% by FY31. This is likely to improving growth, technology adoption and earnings resilience.
• Leverage to expanded data centre construction in the US.

Market Concerns About Progress in DNEL

The Company is the market leader in North America (DNA) and the second largest player in Asia Pacific (DNAP). In contrast, DNL is an emerging player in EMEA and LATAM (DNEL), where growth has been slower than originally anticipated. We view DNA and DNAP as the Company’s established earnings base, while DNEL represents a longer-term growth opportunity with a higher degree of execution risk.

The slower-than-anticipated growth in DNEL is attributed to a disciplined, capital-light, regulated market-entry model rather than buying share through price. This likely means that a material earnings contribution from these regions is more back-ended and carries more execution risk than North America and Asia Pacific. While DNL’s market share today is very small across EMEA and LATAM, the available EBIT pool provides a major runway for disciplined growth. These markets are supported by the long-term demand for copper, gold, critical minerals and infrastructure (Q&C).

Globally, mining investment is increasingly shifting towards both Africa and Latin America. The Company is also leveraging its existing customer relationships. Recent cornerstone wins in Brazil, Ghana and Tanzania, plus the Peru emulsion plant, are intended to establish local platforms for future growth in these regions.

Balance Sheet Scope to Pursue Growth Opportunities

Gearing (on a net debt to EBITDA basis) as at 31 March 2026 was 1.3x and well below the long-term target range of 1.75-2.25x.

Following completion of the Phosphate Hill sale on 30 June 2026 (which formally concluding the fertilisers separation), gearing is expected to increase to ~2x due to the loss of associated earnings. However, this increase is temporary, with the Company having cancelled the current share buyback program. This was done in order to strengthen the gearing position in order to pursue high-returning organic & inorganic opportunities.

Fundamental View

The shares have re-rated following the Company’s transition to a pure-play explosives business. The current 1-year forward P/E multiple of ~20x is above the ~16x average over the past two years. The re-rating reflects the greater earnings visibility afforded by the standalone explosives business compared with the former combined explosives and fertiliser businesses under Incitec Pivot

A key catalyst for a further re-rating is the upcoming FY26 result (due 9 November), which is likely to increase market confidence in DNL’s progress towards the FY28 EBIT target. To this end, we consider that there is the potential for upgrades to the medium-term EPS growth profile (currently +7% over FY26-29 on a CAGR basis).

Charting View

Our recent charting analysis on 22 September in The Dynamic Investor noted that Dyno Nobel broke out from the consolidation and retested the breakout. It is still holding in here despite the broader market coming back over the past few weeks. DNL should continue to trend higher from here and current levels remain a buying opportunity.

 

Michael Gable is managing director of Fairmont Equities.

 

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