Strong Commodity Prices a Positive, But Unlikely to Drive Volumes Much Higher for Aurizon

Solid 1H for Aurizon but Outlook Is Subdued; FVE Downgraded to AUD 4

Australian Reporting Season: Aurizon Holdings, Bendigo & Adelaide Bank and GPT Group

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Equity Bottom-Up

Aurizon's share price has appreciated substantially during the past four months, underpinned by the recent rally in metallurgical coal prices, which have risen by more than 20% since February, largely due to China stimulus and improved sentiment.We believe the market is too bullish on bulk commodity prices, given China's steel consumption is likely to decline as it transitions from an investment-driven to a consumption-driven economy. We consider Aurizon to be overvalued and believe its stock price doesn't adequately reflect potential downside risks over the medium term.Analyst: Adrian Atkins

Aurizon's share price has appreciated substantially during the past four months, underpinned by the recent rally in metallurgical coal prices, which have risen by more than 20% since February, largely due to China stimulus and improved sentiment.We believe the market is too bullish on bulk commodity prices, given China's steel consumption is likely to decline as it transitions from an investment-driven to a consumption-driven economy. We consider Aurizon to be overvalued and believe its stock price doesn't adequately reflect potential downside risks over the medium term.Analyst: Adrian Atkins

We Remain Concerned Over Medium-Term Risks