Deutsche Bank cautious on EMEA miners, Rio Tinto still top-pick

Deutsche Bank reiterated a 'neutral' view on the European, Middle East & Asia mining sector, telling clients they were cautious given the modest deterioration seen in macro indicators for the sector.

In parallel, they also revised commodity price forecasts which resulted in roughly 11% downgrades to its earnings per share estimates for the sector in calendar years 2017 and 2018.

The broker marked down its EPS estimates for BHP Billiton (Hold), Glencore (Hold) and Anglo American (Hold) over 2017 to 2019 by an average of 9%, even as it upgraded those for Rio Tinto (Buy) and South 32 (Hold) by about 7% and 20%, respectively.

Higher price projections for aluminium lay behind the latter.

Analysts at Deutsche lowered their target price for BHP Billiton from 1,450p to 1,400p, for Anglo American from 1,100p to 1,000p and for Ferrexpo (Buy) from 280.0p to 270.0p.

KAZ Minerals's (Sell) target was taken down from 370.0p to 350.0p.

Meanwhile, its model overhauls and lower copper price forecasts led it to slash its EPS estimates for Antofagasta and First Quantum (Buy) by 25% and 40%.

Rio Tinto remained its top-pick, the broker said, and First Quantum its preferred stock among the pure play miners.

Hence, the analysts bumped up their target on the former from 4,140p to 4,200p.

"With our estimates largely in line with consensus, we doubt the miners will benefit from further earnings revision momentum over the near-term."