Macquarie tips double digit upside for this ASX 200 stock

Orica Ltd (ASX: ORI) is an ASX 200 materials stock. The company is the world's largest provider of commercial explosives and innovative blasting systems to the mining, quarrying, oil and gas and construction markets. 

In 2025, it has seen its share price rise more than 40%. 

What's behind the success of this ASX 200 stock?

This rise has been driven by the company's strategic shift from being a pure explosives supplier to a broader, more diversified provider. 

The Motley Fool's Marc Van Dinther reported earlier this month that acquisitions in specialty chemicals businesses and the roll-out of digital blasting platforms have helped generate higher-margin, repeatable revenue rather than one-off explosives sales.

In its most recent financial results, the company reported its highest profit in 13 years. 

It also reported an EBIT of $992 million and strong growth across all segments. 

The company also paid out a record full year dividend of 57 cents, an increase of  21% from last year's 47 cents.

Macquarie's updated view

The team at Macquarie released a new report yesterday with updated guidance on this ASX 200 stock. 

One key takeaway from the report is the company's preparation for a strategy refresh (details expected in March) following positive early FY26 momentum.

Macquarie said Vik Bansal commences as Chairman post Dec 16 AGM who has a strong track record of cost out from his time as CEO of Boral (ASX: BLD).

Macquarie also highlighted that Orica could close the gap between itself and competitor Dyno Nobel (ASX: DNL). 

It said Dyno Nobel is in midst of its $300m transformation program; this is lifting margins with full benefits targeted in FY28. 

Dyno Nobel's EBIT margins are above Orica's at 13.4% (12.9% explosives) vs ORI's 12.0% in FY25a. 

In our view, an opportunity exists for ORI to close the margin gap to DNL through cost-out and mix benefit as higher margin Digital & SMC grows faster than Blasting. As a scenario, narrowing the gap by half over next 3-4 years would = c$100m of EBIT & a ~10% benefit to our FY28e/FY29e EPS.

Valuation

Macquarie said Orica shares are currently trading at 17.2× FY27 PE, a ~5% discount to the ASX100. 

It also said it is trading at a slight discount to competitor Dyno Nobel's 17.6x and it sees a positive earnings outlook for the ASX 200 stock coupled with a strong balance sheet.

Based on this guidance, Macquarie has an outperform rating on this ASX 200 stock. 

It also has a price target of $25.95. 

This indicates an upside of 10.85%. 

The post Macquarie tips double digit upside for this ASX 200 stock appeared first on The Motley Fool Australia.

Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. 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.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2025