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31 Jan 2022 | 09:10

Berenberg raises target price on Anglo American

(Sharecast News) - Analysts at Berenberg raised their target price on mining group Anglo American from 3,300.0p to 3,500.0p on Monday, stating its 2022 consensus had scope to "grind higher". Berenberg said Anglo American shares had outperformed year-to-date, up 10% in volatile markets, and while it feels that the diversified mining sector was looking "fairly fully valued", mainly on the consensus view that commodity prices will ease over the coming years, the analysts also believe it is looking "increasingly likely" that a metals-intensive energy transition keeps prices higher for longer, and, in the case of certain commodities, supply/demand challenges are playing a part in price spikes.

The German bank, which reiterated its 'buy' rating on the stock, noted that metallurgical coal was a good example, with tight markets contributing to spot prices of around $400 per tonne - well above its more conservative $269 per tonne estimate and consensus of $250 per tonne. The same goes for other commodities, such as iron ore, rhodium, and nickel, it said.

"We, therefore, believe that while Anglo American is approaching fair value on our base-case estimates, there is scope for consensus to continue to surprise to the upside, and this, coupled with a fairly optimistic outlook for infrastructure spending, should help Anglo American shares to grind higher," said Berenberg.

"Anglo American offers an 11% FCF yield for 2022E and we are 5% ahead of EPS consensus; marking to market at spot, our FCF yield jumps to 16% and we are 38% ahead of consensus. While we think that there is scope for moderation in prices as supply comes online, we still expect rising consensus estimates, which should be supportive for Anglo American shares."
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