Broker tips: Kenmare Resources, Vesuvius, Rio Tinto
Analysts at Berenberg raised their target price on mining company Kenmare Resources from 390.0p to 460.0p on Wednesday after the group's fourth-quarter earnings topped estimates.
Berenberg highlighted that Kenmare's fourth-quarter production beat estimates, coming in at 219,000 tonnes ilmenite, ahead of forecasts for 195,000 tonnes.
The German bank pointed out that Kenmare's beat was a result of high-grade ore, which was above its 3.8% expectation and drove a beat of heavy mineral concentrate production at 339,000 tonnes, also ahead of its 290,000-tonne estimate.
Berenberg also noted that importantly, shipments were strong, totalling 321,000 tonnes and ahead of its 281,000 estimates, with ilmenite shipments of 283,000 beating its 245,000-tonne estimate.
The analysts also acknowledged that Kenmare noted that mineral sands markets remained "buoyant", with tight ilmenite markets in the fourth quarter of 2020 flowing into the first quarter of 2021, underpinned by demand for feedstock from pigment producers and limited new supply.
JPMorgan Cazenove downgraded its stance on shares of molten metal flow engineer Vesuvius on Wednesday, to ‘neutral’ from ‘overweight’, following a strong recovery in the share price.
"Management has a strong cost savings track record, though we expect the emphasis to shift towards growth and M&A from here," JPM said.
"We see more upside elsewhere, with the group's FY2 price-to-earnings now being 30% above its average since 2015."
JPM lifted its price target on the stock to 591.0p from 575.0p.
Deutsche Bank downgraded miner Rio Tinto to 'hold' from 'buy' on Wednesday following a "powerful" re-rating in recent months.
DB said its upgrade to buy in mid-2020 was based on stronger for longer iron ore prices and an attractive valuation with compelling near-term cash yields.
"The surge in iron ore prices to peak levels last seen in2011 has seen a significant re-pricing across the forward curve," the bank said. It added that near-term cash flows are compelling and market leading but close to peak and not sustainable.
Deutsche, which lifted its price target on the stock to 6,000.0p from 5,100p.0, said that while it is always tempting to break from its tried and tested mid-cycle valuation approach at cyclical peaks and troughs it believes this would be a mistake.
"The iron ore market remains fundamentally tight with supply challenges that could persist beyond 2021, but we see a normalisation pathway through H2'21 and 2022 on slowing demand and latent capacity growth," it said.
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