Fortescue: Solid FY26 results, although DPS a touch lighter than expected; retain OW

Research evidence excerpt

J P M O R G A N

Asia Pacific Equity Research

20 August 2026

Fortescue

Solid FY26 results, although DPS a touch lighter than

expected; retain OW

Overweight

FMG.AX, FMG AU

Price (19 Aug 26):A$18.06

▼Price Target (Jun-27):A$22.00

Prior (Jun-27):A$23.00

Key takeaways: (1) FY26 EBITDA of $8.2bn and underlying NPAT of $3.5bn were

broadly in line with JPM/consensus expectations. (2) The final dividend of AUD

46cps was below consensus of 56cps, but still took the full-year payout to 65% (vs

the 50-80% policy) – we also view a slightly lower dividend as prudent ahead of

a rising capex cycle. (3) While the green focus for the company remained

prominent in the presentation and analyst questions on the call, there was no

incremental news on copper projects, power supply to datacenters, or the Gabon

iron ore opportunity. Higher exploration and administration charges drive a 2%

reduction to our FY27 earnings estimate. FMG is Overweight-rated due to its

undemanding valuation metrics, and upward skew to iron ore prices (from current

levels in the cost curve).

FY26 results. FY26 underlying EBITDA of US$8.6bn rose 9% YoY on record

shipments, and a 7% increase in realised price to $91/t. Free cash flow of $3.2bn

increased 25%. The final dividend of 46cps (65% FY26 payout) was lighter

than expected, consistent with capital discipline ahead of elevated FY27

investment. Statutory NPAT was reduced by a $525m non-cash Iron Bridge

impairment and a $73m compensation claim expense.

Iron Bridge continues. FMG management reiterated its aim to pursue a

turnaround at Iron Bridge, despite what looks to be another year of FCF losses.

It remains unclear what market conditions need to be for a curtailment to be

explored. Iron Bridge and MIN’s Pilbara hub are both marginal assets at

today’s iron ore price of ~$96/t.

Retain OW. FMG trades at a P/NPV of 0.81x, and FY28E EV/EBITDA of

5.8x/~4% dividend yield. We note consensus earnings remain under pressure

should spot iron ore persist at $96/t (with high freight rates), but we believe the

market will recalibrate higher with elastic supply exiting the market. We

continue to see upside to the stock into the year end when China port restocking

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