Sims: FY26 result: Non-ferrous does heavy lifting; SLS limps, but not broken

Research evidence excerpt

J P M O R G A N

Asia Pacific Equity Research

19 August 2026

Sims

FY26 result: Non-ferrous does heavy lifting; SLS limps,

but not broken

Overweight

SGM.AX, SGM AU

Price (18 Aug 26):A$22.97

▼Price Target (Aug-27):A$29.50

Prior (Aug-27):A$31.00

While SGM’s FY26 results disappointed on the SLS earnings profile, we remain

Overweight, given: (1) upgrades on 2HFY26 SAR and NAM performance (largely

non-ferrous); (2) SLS volume discussion makes sense, and we see tension between

DDR4 and the data centre refresh rate - while vols will take time, SLS continues

to progress growth beyond DDR4, with DDR5/GPU R&D under way; and (3) a

$12/share NTA (almost entirely metals) implies SLS being priced only at 15x EBIT

on a depressed $179m FY27 EBIT assumption. Our Aug-27 PT drops to A$29.50

on modestly lower long-term (SLS) earnings.

SLS growth rate will be lumpy. Data centre refresh volumes are

understandably impacted by supply chain blockages, and SGM’s commentary

is backed up by peers’. Despite this, the installed base is still significant, and

SLS remains a market-leading hyperscaler service provider with strong

potential to leverage industry dynamics, given its R&D pipeline around DDR5

and GPU reuse. We see some risk around the upcoming Meta negotiation, but

note that SLS has a better service offering and an established track record,

while Meta prefers service over price. Should resale shares shift, every 1pt of

resale cut would require 5pts of volume to offset, all else equal.

Non-ferrous strong. NAM and SAR EBIT rose 55% and 200% HoH,

respectively, in 2HFY26. This momentum (driven largely by non-ferrous)

looks likely to extend into 1HFY27, given copper and Zorba pricing (along

with a better ferrous backdrop). While SAR is heavily exposed to Zorba,

pricing is broadly flat HoH in 1HFY27 and demand is “very good.” We assume

some normalisation in 2HFY27 and will be watching for sudden Zorba moves

as a real-term indicator of SAR performance.

Australia

Australia Industrials

Lee Power AC

(61-2) 9003-8725

Dylan Adrian

(61-2) 9003-7397

Nick Torelli

(61-4) 6817-5219

J.P. Morgan Securities Australia Limited

Half Yearly Forecasts (FYE Jun)

Adj. EPS (A$)

H1

H2

FY

2026A

0.31

1.15

1.48

…