Credit Suisse downgrades Glencore to 'neutral'

Credit Suisse downgraded Glencore to ‘neutral’ from ‘outperform’ and lifted the price target to 200p from 160p.

The price target lift reflects a 10% reduction in the bank’s GBP/USD assumption and a 4% increase to 2017 earnings before interest, tax, depreciation and amortisation largely on higher coal price realisation.

CS noted Glencore has rallied strongly year-to-date and while “it isn’t quite mission accomplished on deleveraging, credit concerns have reduced materially and an ongoing commitment from the company to reduce net debt to around $15bn should secure the group's investment grade credit rating".

However, the bank said it was still negative on copper, which is Glencore’s largest exposure at around 40% of industrial EBITDA.

CS said the stock’s valuation has now re-rated back to its target multiples and is more aligned with peers.

It argued that successful delivery of the company's main earnings and debt reduction targets together with latent capacity growth in copper and zinc still provides upside potential on a medium term view, but weak copper prices lead to a slower-than-planned return of copper volumes.

At 0910 BST, Glencore shares were down 1.1% to 183.85p.