In early December 2025, we recommended Orica (ASX:ORI) in The Dynamic Investor as a BUY. Since our report, the shares have gained over 8%. After reporting a solid full-year result, the Company provided guidance for FY26 EBIT growth across all segments. ORI also expects to sustain EBIT growth beyond FY26.

Given the recent gains, do current levels still present an attractive entry point?

About Orica

Orica (ORI) is the world’s largest manufacturer and supplier of commercial explosives and blasting systems to the mining, quarrying, oil and gas and construction markets. The Company also supplies sodium cyanide for gold extraction and provides ground support services in mining and tunneling.

Following recent acquisitions, ORI is now the world’s largest explosives provider. The Company now reports across three core segments: Blasting Solutions (core explosives business), Digital Solutions (including the Terra Insights acquisition), and Specialty Mining Chemicals.

The new segment reporting highlights the Company’s strategic shift from a traditional explosives company to a diversified mining solutions provider.

Key Fundamental Drivers

Blasting Solutions Segment Continues to Perform Strongly

For the 12 months to 30 September 2025 (FY25), the Blasting Solutions segment reported EBIT growth of +15%. This was delivered from stronger performance in the EMEA region, a recovery in Latin America and continued uptake of higher-margin premium products. Volume growth for premium product remains robust, with premium solutions reporting >20% volume growth over FY23-25 on a CAGR basis. Further, advanced bulk explosives volumes have increased by >200% and Wireless Initiating Systems increased by >40%.

Over the medium term, ORI expect the Blasting Solutions segment to deliver ‘GDP plus’ EBIT growth through the mining cycle. This expected growth is underpinned by continued rollout of its advanced blasting technologies, improved product mix and margin expansion.

Digital Solutions Segment Accelerates the Growth Profile

The Digital Solutions segment delivered strong EBIT performance in FY25 (+32%). Favourable market dynamics and demand from customers have provided scope for ORI to lift its market share and provide value-added services to customers. Additional upside for the segment earnings outlook could come from a sustained commodities exploration cycle (gold; copper) and Mine Site Production penetration, which is presently is an un-served market.

The Company has upgraded EBIT growth expectations from low double-digits to mid-teen growth over the next three to five years. This increase reflects several key factors:

• Cross selling to existing customer base and to new markets such as civil tunneling and infrastructure.
• Recurring revenue expansion. ORI has a high proportion of recurring revenue with low churn rates (3.4% in 2025 down from 4.6% in 2024), demonstrating strong customer retention.
• Improved exploration activity, particularly in gold and copper segments (to which ORI now has a greater revenue exposure). At the recent FY25 results release, management noted gold exploration has been “extremely strong” for ~18 months and copper exploration is picking up.
• Digital transformation for the mining industry remains at an early stage and ORI is at the forefront through its BlastIQ, OrePro, GroundProbe and Axis technologies Mining companies are increasingly embracing digitisation, automation, and productivity analytics across ORI’s digital platforms.

Balance Sheet Capacity for Further Capital Management

Gearing (on a net debt to EBITDA basis) remained low at 1.4x as at 30 September 2025 and at the bottom end of the target gearing range of 1.25-2.0x. As such, ORI has announced a new $100m share buyback following the recently-completed $400m share buyback program.

With the gearing level well within the target range, there is scope for further share buybacks and potentially bolt-on Mergers & Acquisitions (M&A). Having ORI has only just existed a sustained period of acquisitions (~2½ years). During this period, ORI’s focus has been on integration and scaling the acquired businesses. As such, the Company is not planning on any material M&A. There are some bolt-on acquisition opportunities in specialist chemical areas re copper market (eg floculants/reagents) but these are not considered to be significant.

The Company is continuing with its plan to sell non-core industrial land. Deer Park Stage 2 should be sold for at least $200m in the later part of 2026. ORI is also looking at its Botany site, with parcels of land likely to be sold in 2027. In the absence of new growth opportunities and/or M&A, excess funds are likely to be returned to shareholders. This may entail an increase in the size of the share buyback throughout the course of calendar year 2026.

Fundamental View

Since our recent report, ORI shares have re-rated. They are currently trading on a 1-year forward P/E multiple of ~20.5x, up from ~18.5x. While the current multiple is above the average multiple over the last five years, it remains undemanding in the context of an EPS growth profile of +10% over FY25-28 on a CAGR basis. We highlight two factors underpinning the potential for a re-rating from current levels:

i. Stronger-than expected earnings growth on the back of: a) Robust near-term demand in mining end-markets for premium products and services and adoption of technology-enabled blasting solutions and b) The potential for greater-than-expected contribution to group EBIT growth from the higher-growth Digital Solutions and Specialty Mining Chemicals segments, and

ii. A strong balance sheet position underpinning prospects for further capital management initiatives (albeit not expected until calendar year 2026).

Charting View

When we last looked at ORI on 2 December in The Dynamic Investor, we noted: “The shares remain in an uptrend. ORI should continue to head higher from here and any dip is a buying opportunity.” The recent dip and bounce from the past few days has once again confirmed the nice uptrend in ORI and we believe that this is still a buying opportunity and that the shares should continue to trend higher from here. Initial stops can be considered back near $23.

 

Michael Gable is managing director of Fairmont Equities.

 

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