Canada-based TRQ had last week maintained force majeure as it outlined lower production figures, worker numbers up to 25% less than planned, plus little progress on either Shafts 3 and 4 or on key approvals needed for the block cave undercut.
In a research note, Macquarie said TRQ's copper production and shipments were 9% and 46% below its estimates, respectively.
It incorporated a six-month delay into its base case for the underground "which has had a material impact on our earnings outlook for TRQ".
"We cut our CY21 earnings by 19% but lift CY22 by 12% to reflect some recovery in shipment rates vs production," Macquarie said.
"The impact of the delay to the underground ramp-up is evidenced by the 34%, 22% and 54% cuts to our CY23, CY24 and CY25 earnings, respectively.
"The material downgrade to our earnings outlook drives a 16% cut in our price target from C$25 to $21."
It downgraded TRQ from outperform to neutral.
Macquarie noted TRQ had not confirmed the quantum of the underground delay or updated production, cash cost or capex guidance for CY21.
"Given the lack of activity in the 2QCY21 and ongoing COVID-19 related pressures, we expect capital expenditure to fall below guidance in CY21," it said.
"However, the capex is only delayed and as a result we lift our total capital expenditure budget for the Hugo North underground from US$7 billion to $7.3 billion."
The Mongolian government, which owns 34% of Oyu Tolgoi, indicated earlier this year it was unhappy with the updated plan for the over-budget underground expansion and has threatened to void the mine's 2009 investor agreement if Oyu Tolgoi's tax claims aren't dismissed in international arbitration.
TRQ - which is in turn owned 50.8% by Rio Tinto - owns 66% of Oyu Tolgoi.
Its shares (TSX: TRQ), which have ranged between $9.80-$26.45 over the past year, closed down 4.4% yesterday to C$16.45, valuing it at $3.3 billion (US$2.6 billion).
