Vale S.A. Upgraded to Sector Perform at RBC Capital
The company's weak Q3 results reported in Nov 1 and Vale Day guidance saw Vale S.A. (NYSE:VALE) shares sell off and consensus earnings fall, but the rally in iron ore prices has since provided some support.
Analysts at RBC Capital increased their long-term iron ore price forecasts to $75/t from $65/t. This and a weaker BRL assumption helps to increase their NAV estimate by 39% to $20.49/share. The analysts believe Brazil risks, its EM link, and concentration in iron ore will continue to see shares discounted, however, the stock should be more resilient into future iron ore downturns. The analysts upgraded the company to sector perform from underperform, raising their price target to $17 from $12.50.
| Symbol | Price | %chg |
|---|---|---|
| RIO.BA | 8780 | -0.11 |
| UNTR.JK | 26725 | 0.56 |
| CUAN.JK | 7325 | -1.02 |
| BRMS.JK | 470 | -0.85 |
UBS Downgrades Vale Amid Concerns Over Iron Ore Outlook
UBS analysts lowered their rating on Vale S.A. (NYSE:VALE) from Buy to Neutral and reduced the stock’s price target from $14.00 to $11.50. Despite Vale’s notable advancements this year in areas like operational improvements, resolving the Samarco litigation in Brazil, and appointing a new CEO, UBS sees both challenges and uncertainties in the company’s future.
Vale achieved significant milestones in 2024, with positive developments expected to continue in areas such as government relations, a new rail concession agreement, and updates to cave regulation. However, UBS expressed concerns about the medium-term fundamentals of the iron ore market, noting potential pressure on iron ore prices. UBS pointed to risks in global markets for Chinese steel exports, which could face limitations without adequate stimulus to support demand.
Looking ahead, UBS expects Vale to return only its base dividend to shareholders in 2025 and 2026, using additional free cash flow for other disbursements. At an iron ore price of $100 per ton, UBS projects Vale’s free cash flow yield for 2025 to be around 3%, with an estimated dividend yield of 7%.
Vale Upgraded to Outperform at RBC Capital
RBC Capital analysts upgraded Vale S.A. (NYSE:VALE) to Outperform from Sector Perform, setting a new price target of $15.00 (previously $13.00). The firm anticipates a further decline in iron ore prices to reach cost support levels of $75-$80/t in the upcoming years.
Despite the unfavorable impact on Vale and its iron solutions business, the analysts mentioned that the current price reflects a long-term iron ore value of approximately $75/t. Given its recent underperformance, Vale is well-positioned to benefit from a potential sector rebound driven by stimulus expectations. Additionally, the analysts noted that the sale of its base metals stake could initiate a series of positive catalysts.
