JPMorgan lifts Antofagasta stock rating, raises target to GBP24

On Wednesday, JPMorgan analyst Patrick Jones revised his stance on Antofagasta Plc (LON:ANTO:LN) (OTC: ANFGF), changing the stock’s rating from Underweight to Overweight and significantly increasing the price target from GBP16.00 to GBP24.00. The adjustment reflects a more optimistic outlook for the copper market and the company’s growth prospects. According to InvestingPro data, Antofagasta maintains a strong financial health score of 2.81 (GOOD), with a market capitalization of $22.81 billion and has maintained dividend payments for 31 consecutive years.

Jones highlighted that since December 24, 2023, there had been concerns that renewed US-China trade tensions might negatively impact copper prices and miners in the Europe, Middle East, and Africa (EMEA) region. However, the expectation of a V-shaped recovery driven by Chinese stimulus later in the first quarter of 2024 is now seen as a positive catalyst for copper demand and mining equities. InvestingPro analysis shows the stock has demonstrated relatively low price volatility and maintains a healthy current ratio of 2.14, indicating strong liquidity to weather market fluctuations.

According to JPMorgan’s China Economists, led by Haibin Zhu, the National People’s Congress (NPC) meeting scheduled for March 5-8, 2024, is likely to announce fiscal stimulus measures, including consumer support, which should bolster copper demand. Furthermore, JPMorgan’s Commodities team forecasts the copper market to move into a deficit by 2025, with the shortfall widening significantly by 2030.

Antofagasta is positioned to offer substantial growth in copper production, with an expected increase of 15% by 2027 and 30% by 2028 compared to 2024 levels, outpacing its peers. Jones also mentioned that revisions to the company’s business model, which now includes the life extension projects at the Los Pelambres and Zaldivar mines until 2050 and the latest reserve estimates, have led to an approximate 50% increase in Antofagasta’s net present value (NPV).

Following the company’s full-year 2024 results, Jones updated the 2025 and 2026 group EBITDA forecasts, each by 2%, and raised the price target to GBP24.00 per share. He noted that Antofagasta’s stock trades at a higher multiple compared to its EMEA Base Metal peers, but it aligns more closely with larger-scale global copper peers, which trade around 10 times EV/EBITDA. InvestingPro data reveals the company currently trades at an EV/EBITDA of 8.96x and a P/E ratio of 29.96x, with revenue growing at 2.66% over the last twelve months. Get access to over 30 additional key metrics and insights with InvestingPro’s comprehensive research report.

The double upgrade to Overweight by JPMorgan reflects a significant shift in confidence in Antofagasta’s growth trajectory and its potential to capitalize on the anticipated improvements in the copper market.

In other recent news, Antofagasta Plc has seen a range of reactions from financial analysts. RBC Capital Markets downgraded the stock from Sector Perform to Underperform due to concerns about the company’s high capital expenditure for its Centinela second concentrator project and potential impacts from a downturn in copper prices.

In contrast, Bernstein analysts upgraded Antofagasta from ’Market Perform’ to ’Outperform’ due to the company’s attractive valuation and growth prospects. They highlighted the potential for growth tied to the expected Environmental Impact Assessment (EIA) approval to extend the life of the Los Pelambres and Zaldivar mines.

Meanwhile, Canaccord Genuity analysts also upgraded Antofagasta from Hold to Buy, even while reducing production and EBITDA forecasts for fiscal years 2024 and 2025. They maintained a price target at GBP20.65, reflecting a roll-forward of their valuation into 2025 from the previous year.

These are recent developments that reflect varying perspectives on the company’s future. While RBC Capital Markets’ downgrade signals caution, both Bernstein and Canaccord Genuity see potential upsides for Antofagasta. Their analyses indicate that despite the challenges, there may be opportunities for investors in light of the company’s valuation and growth prospects.

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