Aurizon Holdings Limited: Income today, Bulk growth tomorrow. Reiterate Buy

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Aurizon Holdings Limited: Income today, Bulk growth tomorrow. Reiterate Buy

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Aurizon Holdings Limited

Income today, Bulk growth tomorrow.

Reiterate Buy

Reiterate Rating: BUY | PO: 4.35 AUD | Price: 4.12 AUD

Bulk inflection point supports FCF and dividends 15 May 2026

We see AZJ’s Bulk division as transitioning from investment to harvest. We believe the Equity

prior elevated investment phase (that temporarily diluted dividends), has now largely

passed. We forecast Bulk EBITDA to grow from c.$209m in FY26E to c.$292m by FY28E,

Key Changeswith capex moderating from FY27E. This underpins a step-up in free cash flow and

supports a 90% payout ratio, driving a c.6% dividend yield. We view Bulk as a key driver (A$) Previous Current

of incremental value and earnings growth. Price Obj. 4.15 4.35

2026E Rev (m) 4,203.5 4,205.7

2027E Rev (m) 4,601.7 4,336.5Coal yield solid, Network anchors earnings & valuation

Coal haulage economics have tightened from pre‑COVID lows, shifting from excess 2028E Rev (m) 4,762.8 4,324.1

capacity and aggressive pricing to a more balanced, disciplined market. Coal EBITDA 2027E EPS 0.26 0.29

remains robust with yields stabilising at c$30/000’NTK and strong near-term cash flows. 2028E EPS 0.28 0.27

However, c.65mt of contracts expire in FY28 (equivalent c.28% of FY25 contracts). We 2026E EBITDA (m) 1,713.4 1,728.3

assume c.85% re-contracting. Network to deliver >$1.0bn EBITDA and c.60% of group 2027E EBITDA (m) 1,795.9 1,826.6

EBITDA, with regulated returns providing stability. The UT5 framework (to FY27) 2028E EBITDA (m) 1,821.2 1,783.6

insulates earnings from volume volatility, supporting consistent cash generation.

Lara Tufegdzic >>

Earnings upgrades, attractive valuation and income ResearchMerrill LynchAnalyst(Australia)