JPMorgan upgrades Glencore to 'overweight'

The bank noted that EMEA miners are cheap and high-yielding reflation proxies and said its economists have raised their 10-year yield forecasts to 1.65% by the fourth quarter of this year following the passage of a $1.7trn US fiscal stimulus package.

JPM said Glencore has the highest exposure to base metals and copper, at 40% of EBITDA, of the UK diversified miners and "upside risks prevail", including new supply risks to copper and nickel due to an accident at Norilsk over the weekend.

"At current metal prices we calculate $18bn of 2021E mark-to-market EBITDA and $9bn of free cash flow for 14%/16% FCF yield," it said.

"Backing out our circa $20bn equity value for commodity trading, at its $56bn market cap leaves its Industrial assets trading on just 2.5x 2021/22E EV/EBITDA."

JPM said Glencore retains higher regulatory and ESG risks than BHP, Rio Tinto and Anglo American, "but an improving operational outlook and surging earnings momentum" create a low bar to its revised price target, even under JPM's "conservative" commodity price forecasts.