Risk Reward Update: Sims Limited | Asia Pacific

Research evidence excerpt

Risk Reward Update: Sims Limited | Asia Pacific

UpdateM

RiskRisk RewardReward– Sims Limited- Sims(SGM.AX)Limited (SGM.AX)

Stronger SLS, higher scrap; cautious on earnings durability

PRICE TARGET A$26.00 EQUAL-WEIGHT THESIS

Blended Methodology - Our PT is derived as the equally-weighted average of a DCF valuation ▪Structural improvement in the business

and P/E relative valuation. driven by SLS growth;

▪Stronger-for-longer DDR4 pricing

P/E: A 20% discount vs the ASX200 Industrials ex Financials index applied to FY27e EPS. In supporting near-term SLS earnings;

our view, this discount is appropriate given SGM's lack of visibility and transparency of ▪Higher scrap prices supporting the

earnings. recycled metals business.

▪However, we remain cautious about

DCF: WACC 8.8%, with 11.3% Ke (5.25% RP, 5.00% RFR, 1.0 beta) and 6.50% Kd. Terminal capitalizing current earnings strength,

growth rate 2.50%. particularly DDR4-driven resale margins, as

A$29.75 recurring earnings power.

Consensus Price Target Distribution A$23.65 A$34.40

MS PT

Consensus Rating Distribution

Source: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates

50% Overweight

42% Equal-weight

RISK REWARD CHART 8% Underweight

MS Rating

AUD Source: Refinitiv, Morgan Stanley Research

A$33.00A$33.00(+17.69%)A$33.00(+17.69%)(+17.69%)

A$28.04A$28.04A$28.04

A$26.00A$26.00(-7.28%)A$26.00(-7.28%)(-7.28%)

A$17.00A$17.00(-39.37%)A$17.00(-39.37%)(-39.37%)

JUN '25 DEC '25 JUN '26 JUN '27

Key: Historical Stock Performance Current Stock Price Price Target

Source: Refinitiv, Morgan Stanley Research

BULL CASE A$33.00 BASE CASE A$26.00 BEAR CASE A$17.00

Markets improve quicker than expected Scrap markets improve, strength in SLS Scrap markets fall lower and for longer

continues

This leads to higher revenues and earnings.