Stocks exposed to copper could rise in 2021 and there may be a buying opportunity around the corner, Morgan Stanley analysts said Monday.
HG00 copper prices,
they accumulated at the end of last year and into 2021, hitting $ 3.696 per pound – their highest level since 2013, after falling to four-year levels in March 2020. The same open to copper has gotten over it but Morgan Stanley got more yet to come.
Despite shareholders ’average yield of nearly 63% since the start of 2020, the investment bank’s equity analysts said they see a positive risk reward for copper-exposed shares.
They named a number of tails, including an accelerating and expected economic cycle, which is “very much for copper. ”
“Therefore, we argue that there is a 30% increase in current share prices if commodity prices are seen through 2021,” they said in a note.
Read: Here are the prospects for industrial metals after the 2020 harvest for steel, iron ore and copper
Copper ‘s reason for the global move towards a lower carbon economy was another reason for being positive. Its position as a key potential for disarmament and the transition of electricity offers “a strong global growth angle as investors’ focus on climate change grows, ”the analysts said.
“Based on this background, we would use potential market volatility around the Chinese New Year over the next month as a buying opportunity with a bullish 2Q21 outlook,” they said. .
When it comes to major levels for 2021, Morgan Stanley preferred the mining and commodity trading giant Glencore GLEN,
Lundin Mining LUN,
and mining and metals company First Quantum FM,
They said that despite strong gains last year, they still saw attractive opportunities as “a tight fundamental picture is increasingly driven by bullish macro drivers.”
Under analysts ’assessment using hypothetical fair values and 2021 spot-based earnings, Glencore stock was up 67%, Lundin 34% upside and First Quantum upside 31%. Under the Morgan Stanley bull case for copper of $ 4 per pound, these increases rose to 93%, 61% and 54% respectively.
The FTSE 100-listed Glencore has an attractive mix of products with exposure to base metals and strong valuation, they said, valuing the fat stock with a price target of 274 cents. Lundin’s “most powerful turnaround story” and recovery potential with improved operational mobility is set to continue in the first half of 2021, and a continental walk could be around the corner. First Quantum would also benefit from the “expansion of copper demand after COVID” and its proactive cash management.
Read: Commodity bull market? ‘This ship is sailing,’ said Goldman’s Currie
Glencore and Lundin also trade at a significant discount, offering a valuation buffer “should metal prices withdraw,” they said, although “First Quantum also has sufficient valuation space.”
Analysts said risks were rising for Antofagasta ANTO,
and Boliden BOL,
– both considered equal weight – ahead of future earnings. Antofagasta could be frustrated when it comes to the 2021 cash cost and capex management due to foreign exchange headlines and project reviews, while Boliden could build its capex view on projects and “stress big on certain sections. ”