Berenberg upgrades Boliden to “buy” on FCF recovery and operational turn

Published 21/07/2025, 11:26
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Investing.com -- Berenberg has upgraded Boliden AB (ST:BOL) to “buy” from “hold,” citing an improving outlook for free cash flow and operational stability. 

The price target remains unchanged at SEK 350, implying upside from the current SEK 299. The stock is down 4% year-to-date.

The upgrade follows a weaker-than-expected second quarter which reflected continued smelter maintenance and FX pressures. 

Despite the miss, Berenberg analysts said the company appears to be stabilizing, with reduced smelter downtime expected in Q3 and supportive prices for gold, silver, and platinum group metals.

Although Boliden faced operational issues at its Garpenberg mine in Sweden, where limited access to higher-grade ore led to a minor downgrade in grade guidance, Berenberg expects Q3 to mark the first positive free cash flow quarter of 2025. 

The addition of two profitable mines, Somincor in Portugal and Zinkgruvan in Sweden, is also expected to contribute to consistent cash generation.

Net debt is forecast to decline from SEK 20.5 billion at end-H1 to SEK 19.5 billion by end-2025, and further to SEK 14.2 billion in 2026. 

The two-year forward free cash flow yield is projected at 12%. Boliden’s EV/EBITDA multiple is expected to improve from 5.8x in 2025 to 4.1x in 2026 and 3.2x in 2027.

Berenberg lifted its EBITDA forecast for 2026 to SEK 24.1 billion, ahead of the consensus SEK 22 billion, reflecting stronger revenue assumptions driven by precious metals prices. 

Earnings per share are forecast at SEK 23 in 2025, SEK 38.08 in 2026, and SEK 48.50 in 2027. 

Free cash flow per share is expected to be negative SEK 44.64 in 2025, before rebounding to SEK 26.14 in 2026 and SEK 48.13 in 2027.

Revenue is projected to rise from SEK 91.2 billion in 2025 to SEK 101 billion in 2026. EBITDA margin is forecast to improve from 19.8% in 2025 to 27.3% by 2027, while EBIT margin is seen rising from 10.1% to 17.7% over the same period.

Capex is expected to peak at SEK 29.5 billion in 2025 before falling to SEK 14.7 billion in 2026 and SEK 10.7 billion in 2027. 

Return on capital employed is projected to improve from 9.1% in 2025 to 16.7% in 2027. Dividend payouts are forecast to resume at SEK 7.59 per share in 2025, increasing to SEK 16 in 2027, with yields rising from 2.5% to 5.4%.

A potential permitting decision at Garpenberg, which would raise mining rates from 3.5mtpa to 4.5mtpa, is seen as a key near-term catalyst. 

At a current 0.83x NAV, Berenberg said Boliden shares appear undervalued for a company of its scale and commodity exposure, but added that future performance will depend on management delivery.

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