HSBC lifts target prices on diversified miners

HSBC revised its target prices higher for the largest of the diversified miners, telling clients it now expected a decline in commodity prices to be less pronounced that it had previously foreseen.

Furthermore, China’s decision to reduce its output of coal was now projected to have a lasting impact and a tighter than expected copper market meant new production was now needed in order to balance the market sooner and at higher prices.

Analysts David Pleming, Derryn Maade and Vidhya Sreelalan said changes in their price forecasts for the relevant commodities meant implied earnings upgrades of between 70% to 80% for Anglo American, Glencore, Rio Tinto and BHP Billiton.

As a result, Glencore’s valuation was lifted by almost 40%, which was the largest increase, and that of Rio Tinto by 24%, which was the least.

“These changes highlight the extreme price volatility and forecast risk inherent in mining equities,” they said.

The broker also lifted its recommendation on shares of Anglo American from a ‘hold’ to a ‘buy’, while reiterating a ‘hold’ on stock in BHP Billiton and a ‘buy’ on Glencore and Rio Tinto.

Anglo American’s target price was raised from 1,100p to 1,470p, that on BHP from 1,200p to 1,550p and those for Glencore and Rio Tinto from 315p and 3,300p to 440p and 4,000p, respectively.