MS sees improving skew for miners driven by China's recovery

Boliden AB

30/03/2023 10:38

** Morgan Stanley expects improving skew for miners in Q2,
as the recent sector pullback boosted by China's improving
industrial activity enhances risk-reward
    ** China's industry outlook remains positive, with peak
seasonal activity still to come, the broker says 
    ** It sees continued but seasonal improvement in property
sales, rebar demand, cement shipments and steel output
    ** MS says valuation disparity favours diversified miners
like Norsk Hydro  NHY.OL  ("overweight") over copper pure plays,
as copper stocks offer a limited valuation buffer
    ** Among diversified miners, it upgrades Anglo American
 AAL.L  to "equal-weight" following a sharp de-rating, but says
operating risks remain elevated
    ** It maintains "overweight" on Glencore  GLEN.L  and
"equal-weight" on Rio Tinto  RIO.L 
    ** Among mid-caps, MS downgrades Boliden  BOL.ST  to
"underweight" from "equal-weight" on fading mark-to-market
upgrades, lack of 2023 FCF on spot and subdued cash return
prospects
    ** The broker reiterates "underweight" on First Quantum
 FM.TO  and KGHM  KGH.WA 
    ** MS keeps "overweight" on Lundin Mining  LUN.TO , saying
it stands out among copper peers thanks to its turnaround
prospects, growth optionality in Latin America and improving M&A
track record
    ** It also sticks with "overweight" on Endeavour Mining
 EDV.L , citing its low-cost/high-growth portfolio, compelling
FCF yield and capital return prospects

 (Reporting by Marta Frackowiak)
 ((marta.frackowiak@thomsonreuters.com))