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On Tuesday, Goldman Sachs revised its stance on Sumitomo Metal Mining Co Ltd (5713:JP), downgrading the company’s stock rating from Buy to Sell and reducing the price target from JPY 4,100.00 to JPY 3,100.00. The downgrade comes as Goldman Sachs analysts observe a significant decline in margins for several of Sumitomo Metal Mining’s (SMM) products, attributing the downturn to a global decrease in demand for battery electric vehicles (BEVs).
The analyst pointed to impairment losses in SMM’s Philippine nickel business and cathode materials business as evidence of the financial challenges faced by the company. These losses amounted to ¥53.5 billion and ¥57.3 billion, respectively. The analyst noted these setbacks as indicators of the deteriorating profitability within key segments of SMM’s operations.
Legislative changes in major markets are also believed to impact SMM’s business outlook. In the United States, both the House of Representatives and the Senate have voted to revoke a minimum BEV sales regulation based on Advanced Clean Cars II ( ACC (NSE:ACC) II). In Europe, a grace period for CO2 emissions regulations has been confirmed, potentially affecting demand for BEVs and, by extension, for SMM’s products.
Another factor influencing Goldman Sachs’ downgrade is the anticipated technological shift in BEV batteries. The move from nickel-cobalt-aluminum oxide (NCA) to nickel-manganese-cobalt oxide (NMC) in the composition of 4680 cylindrical batteries is expected to challenge SMM’s competitive position in the cathode materials market.
Reflecting these industry and company-specific concerns, Goldman Sachs has adjusted its pretax profit estimates for SMM for fiscal years ending March 2026 and 2027, projecting a decrease of 33% and 38%, respectively. This reassessment has led to the revised 12-month target price for SMM’s stock, now set at ¥3,100.00, down from the previous target of ¥4,100.00.
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