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Q3e: fairly flat prices (in SEK), higher volumes. EBIT excl. PIR lowered by 5-2% for '24e-'25e, '26e unchanged. Overreaction to Q2 miss creates a BUYing opportunity.
Boliden AB
>100% adj. EBIT excl. PIR growth in Q2e. Adj. EBIT excl. PIR lowered by 4-2% for '24e-'26e. Attractive valuation, strong earnings momentum, easy comps. BUY.
Q1 was the low point, outlook significantly better. Higher prices and weaker SEK drive positive revisions. Share up to BUY (Hold), new TP SEK 390 (310).
A number of attractions offset by peak earnings and downstream exposure Boliden''s favourable geopolitical/ESG risk profile, strong balance sheet with potential for special dividends, low beta, and base metals exposure provide reasons to remain in the stock, although attracting incremental investors is challenging, as the company is potentially at peak earnings on our forecasts. The downstream business in both copper and zinc faces structural challenges as evidenced by multi-year low spot terms hit earlier this year while Boliden is investing further in downstream through Odda expansion. With continued uncertainty around Latin American exposure, we see European investors drawing towards Boliden for copper exposure and the company should generate mid-single digit FCF/dividend yield on our forecasts. We maintain our Neutral rating but continue to prefer pure upstream base metals exposure. Capex likely to stay high for a number of years, constraining special dividends Boliden''s long life and large mines (Aitik, and Garpenberg) face structural grade decline while Boliden Area and Tara have short mine lives (albeit they have been so for a while), making it incredibly challenging to maintain production levels over time without significant capex. Odda expansion indicates that special dividends above the usual 1/3rd payout policy are highly dependent on the sustainability of commodity price strength for a number of years as Tara Deeps spend might be starting up by the time the Odda expansion concludes. Potential Catalysts - Lack of concrete availability would cause significant disruption Lack of concrete availability in 4Q could result in closure of both underground mines in Sweden and would be a significant negative if it eventuates. Any visibility on grades beyond 2021 would be watched closely and might come at 3Q results. The SEK1.25bn Ravliden mine development at Boliden Area was approved at 1Q result, where a permit (still awaited) as part...
Boliden AB Bollore SE
Capitalising on across the board metal price tailwinds, Boliden reported impressive Q3 results. Both divisions had a good run. While Mining margin hit highs unseen since 2018, Smelting managed healthy growth, despite the maintenance shutdown impact. Macro uncertainties are now re-emerging – due to second-wave risk of COVID-19 – which could result in pricing volatility. However, Boliden is very well-positioned to limit the overall operating impact, and its ability to deliver in volatile markets should again come to fore.
