Berenberg upgrades Polymetal to 'buy'

Berenberg upgraded Polymetal International to ‘buy’ from ‘hold’ on Friday and lifted the price target to 1,480p from 1,140p following a rally in gold prices.

The bank noted that since initiating coverage of the stock in July, it has been hold-rated on valuation, despite being "very positive" on the medium-term outlook for the stock. Since then, it has watched as the gold price has drifted higher, taking Polymetal with it.

"In line with our gold price update, a net asset value roll forward and taking into account deleveraging over the course of 2019, and, on a blended valuation of 1.2x NAV and 9x FY 2020E EBITDA (up from 8x to reflect multiple expansion as a result of higher gold prices), we arrive at a GBp1,480 price target, which, with 20% upside in addition to a 4% dividend yield (not taking into account special dividend upside which looks increasingly likely), supports our upgrade to a buy rating."

Berenberg said one of the main reasons it likes Polymetal is the attractive production growth the company has, as well as cost downside.

"With a strong project portfolio, some of which is not included in our base case (eg Prognoz), we think there is potential to maintain a 1.8moz production run rate well into the 2020," it said.

At 1100 GMT, the shares were up 2.2% at 1,235p.