South32 has defensive characteristics, UBS asserts, despite a slowdown in Chinese growth. The broker has upgraded metallurgical coal, alumina and aluminium prices to reflect tight supply.
Outside of China the alumina/aluminium markets may experience structural relief as China pursues decarbonisation and energy efficiency targets.
Moreover, the broker considers the acquisition of up to 25% of Mozal is financially attractive as is a potential re-start of Alumar. Estimates are upgraded and a Buy rating is reiterated. Target rises to $4.10 from $3.40.
Sector: Materials.
Target price is $4.10.Current Price is $3.60. Difference: $0.50 – (brackets indicate current price is over target). If S32 meets the UBS target it will return approximately 12% (excluding dividends, fees and charges – negative figures indicate an expected loss).
