Morgan Stanley’s recent review of Australia’s materials sector highlights a group of companies the firm believes have attractive operational and financial profiles. The bank’s analysis centres on producers and developers that can generate significant cash flow, execute strategic growth projects and play roles in diversifying critical commodity supply chains.
Below is a company-by-company outline of the stocks Morgan Stanley highlighted and the core reasons the bank regards each as notable.
South32 Ltd (S32) - Morgan Stanley notes South32’s capacity to produce substantial cash flow, which the bank says supports robust shareholder returns. The firm also points to South32’s project pipeline, specifically the potential to expand base-metals production via the Hermosa project in the United States. South32 reported a strong financial result for the first half of 2026, recording an underlying EBITDA of $1.1 billion and announcing an increase in its capital management program.
BHP Group Ltd (BHP) - The analysis highlights BHP’s resilient free cash flow profile and its ability to sustain shareholder returns while preserving a strong balance sheet to support favourable growth. Morgan Stanley flagged recent company moves including the sale of a 49% stake in the power network for its Western Australia iron-ore operations to BlackRock for $2 billion. The note also records that BHP made an unsuccessful £40 billion bid to acquire Anglo American.
Lynas Rare Earths Ltd (LYC) - Lynas is identified as a beneficiary of efforts to diversify rare-earths supply chains away from concentrated sources. Morgan Stanley also notes Lynas is expanding its product mix to include separated heavy rare-earth offerings, positioning the company within downstream segments of the market.
Paladin Energy Ltd (PDN) - The bank expects production issues experienced during the ramp-up of Langer Heinrich to be resolved in fiscal year 2026. Morgan Stanley also highlights Paladin’s growth potential from Patterson Lake South, a project in Canada with an expected nameplate capacity of 9.1 million pounds per annum and first production anticipated in calendar year 2031. If realised, that project could materially increase Paladin’s standing in the uranium market.
Pilbara Minerals Ltd (PLS) - Pilbara is noted for expansion optionality at its Pilgangoora operation, and Morgan Stanley sees scope for a near-term restart at Ngungaju to capitalise on the strong rebound in spodumene prices. The bank also notes that a final investment decision on the Colina project could lift Pilbara’s valuation, with study results expected mid-calendar year 2026.
Iluka Resources Ltd (ILU) - Morgan Stanley views Iluka’s downstream rare-earth strategy as well placed to benefit from the establishment of an ex-China rare-earths supply chain. The bank further suggests that any near-term weakness in the mineral-sands market appears to be reflected in current pricing.
Boss Energy Ltd (BOE) - For Boss Energy, Morgan Stanley cites the potential for an improved production outlook following a revised Honeymoon Feasibility Study expected in the third quarter of calendar year 2026. While the firm notes uncertainty remains, it judges the balance of risks and opportunities to be skewed to the upside and takes a constructive view on the uranium market more broadly.
Deterra Royalties Ltd (DRR) - Morgan Stanley highlights Deterra’s exposure to high-grade iron ore, primarily through the MAC asset, and notes that the company’s royalty model makes its yields less sensitive to movements in iron-ore prices compared with operating companies.
This list reflects Morgan Stanley’s assessment of companies that combine cash generation, project optionality and commodity exposure. The bank’s focus extends across base metals, rare earths and uranium, and emphasises the role that project delivery and supply-chain positioning can play in shaping future returns.