Broker tips: Antofagata, Kaz Minerals, Rolls Royce, Hunting

Goldman Sachs upgraded Antofagasta to ‘neutral’ from ‘sell’ with an unchanged price target of 440p, saying the risk/reward is now balanced.

GS noted that since being added to the ‘sell’ list in February, the stock is down 35% versus the FTSE World Europe down 8.3%.

The bank attributed the underperformance to operational issues at Anto’s mines in Chile, a slump in copper prices, and a rich price paid for the 50% stake in the Zaldivar mine.

It said that at the current depressed price and with spot copper prices now within around 5% of its trough forecasts, the risk/reward for the stock is balanced.

Goldman also upped its rating on copper producer KAZ Minerals to ‘neutral’ from ‘sell’, keeping the price target at 110p, following underperformance.

Since being added to the ‘sell’ list in October, the stock is down 48% versus the. FTSE World Europe down 3%.

Rolls-Royce’s latest profit warning is unlikely to be the last, Investec said on Wednesday as it slashed its price target on the stock to 420p from 520p.

“We continue to see further downside risk to consensus forecasts in the short and medium term from a series of strategic, end-market and accounting headwinds,” the brokerage said.

Investec cut its FY16E/17E earnings per share forecasts by around 31%/30% to reflect the additional £350m headwinds to Civil Aerospace and Marine profitability in full year 2016.

The broker also reduced its FY15E/16E/17E dividend forecasts by around 51%/51%/49%, saying Rolls will likely opt to increase earnings cover to strengthen the balance sheet and maintain the current credit rating.

Oil service group Hunting got a boost on Wednesday after Goldman Sachs reiterated its ‘buy’ rating on the stock, adding it to its ‘conviction list’ as it said the valuation offers a good buying opportunity.

The bank said it expects revenue growth and margin expansion to start from the second half of next year as US onshore drilling activity picks up.

It does not see risks to the balance sheet given that it expects Hunting to remain free cash flow positive through 2015/16.

GS said that within its European sector coverage, Hunting is among the few companies offering exposure to US shale, where it expects a sharp recovery in 2017 onshore rig levels.

The bank reckons US rig count will rebound by around 50% year-on-year in 2017.

“The absence of balance sheet pressures, capex flexibility, growth opportunities, and an attractive valuation makes the stock an attractive investment in our view.”

GS trimmed its target price on the stock to 546.40p from 560.10p.