Leading fundie forecasts 'considerable upside' for this ASX 200 stock

S&P/ASX 200 Index (ASX: XJO) stock Ampol Ltd (ASX: ALD) has come under pressure on several fronts over the past months.

First, Ampol's Lytton refinery was impacted by challenging global refining conditions and operational disruptions in 2024.

That dragged on the Aussie fuel supplier's full calendar year 2024 results, with Ampol reporting a $42 million earnings before interest and tax (EBIT) loss from the Lytton refinery. That was down from the $363 million positive EBIT reported in 2023.

Replacement cost operating profit earnings before interest and tax (RCOP EBIT) came in at $715 million. On a company-wide level, Ampol's earnings before interest, taxes, depreciation and amortisation (EBITDA) of $1.2 billion were down 32% from 2023.

The ASX 200 stock has also not been immune to the sell-off impacting the broader market as investors mull over the potential impacts of United States President Donald Trump's ongoing tariff campaign.

Overall, the Ampol share price is down 37% in 12 months.

But Phil Cornet, a portfolio manager at Atlas Funds Management Australian Equity Income fund, believes Ampol is now well-placed for a turnaround.

Addressing the past month's broader market sell-off, Cornet said (courtesy of The Australian Financial Review):

A sell-off forces investors to ask what is the right price? Good stocks are and will be caught up with overvalued stocks in the sell-off, which creates great opportunities for investors.

Stocks with solid earnings and strong balance sheets that pay regular dividends will endure and will be sought after when the calm returns.

ASX 200 stock with near-term upside

Asked which company in his fund has the most likely near-term upside, Cornet said, "Ampol appears to offer considerable upside with improved refining margins, a stronger balance sheet, and robust cash flow generation."

He noted that the ASX 200 stock "can see increased dividends and the chance of capital management".

Ampol's final fully franked dividend for 2024 was cut to 5 cents per share from $1.80 per share the prior year. That followed the 78% full-year plunge in statutory net profit after tax (NPAT) to $123 million.

But 2025 could be looking up for both profits and dividends for the ASX 200 stock.

According to Cornet (quoted by the AFR):

The company's earnings multiple remains at a discount compared to international peers, and it is trading lower than its long-term historical average after a tough 12 months.

Profits in 2025 will see a sharp increase on 2024, which won't be impacted by maintenance at their Lytton refinery.

Confirmation of a turnaround at its first quarter trading update in April may be the catalyst for a re-rating.

The post Leading fundie forecasts 'considerable upside' for this ASX 200 stock appeared first on The Motley Fool Australia.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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