Section1: Company Overview and Fundamental Insights

1.1 Company Overview:

Sierra Metals Inc. (TSX: SMT) is a precious and base metals producer in Peru and Mexico. The company acquires, explores, extracts, and produces mineral concentrates consisting of silver, copper, lead, zinc and gold. Sierra has interests in the Yauricocha Mine in Peru, and the Bolivar and Cusi Mines, Mexico. The majority of the revenue comes from selling the mineral concentrates to its customers in Peru.

Kalkine’s Growth Report covers the Investment Highlights, Key Financial Metrics, Risks, Technical Analysis along with the Valuation, Target Price, and Recommendation on the stock.

1.2 The Key Positives, Negatives, Investment Highlights and Risks

1.3 Top 10 Shareholders:

The top 10 shareholders together form ~26.64% of the total shareholding. Arias Resource Capital Management LP and Tidal Investments LLC hold a maximum stake in the company at ~­­­20.86% and ~2.50%, respectively.

1.4 Key Metrics:

In Q1 2024, the company reported healthy growth in its revenue on the back of rising production compared to Q1 2023, which is a key positive. Additionally, the company also clocked decent uprise in its cash flows, proving its resilience and agility.

Section 2: Business Updates and Financial Highlights

2.1 Recent Updates: The below picture gives an overview of the company’s recent activities, here the company shared information regarding uplifted contribution from Bolivar Mine.

2.2 Insights on Q1 2024 Financial Performance:

Section 3: Key Risks, Company Outlook:

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

The stock has witnessed an upside of ~17.28% and 30.13% over the last 1 month and 3 months respectively. Moreover, the stock is trading above the average 52-week high price of CAD 1.01 and 52-week low price of CAD 0.34 providing an opportunity to ride the trend.

4.2 Fundamental Valuation

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is May 15, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement. 

Technical Indicators Defined:

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.