UPDATE: Credit Suisse Reiterates Neutral Rating, Lowers PT on Vale SA on Unavoidable Earnings Downside

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In a report published Tuesday, Credit Suisse analyst Ivano Westin reiterated a Neutral rating on
Vale SAVALE
, but lowered the price target from $15.00 to $12.50. In the report, Credit Suisse noted, “Our base-case scenario assumes an oversupply of iron ore for a longer period, reflecting lower prices than currently forecasted by consensus estimates for Vale. We cap our annual average iron ore forecast at USD 85/t until YE2015, USD 84/t in 2016 and USD 90/t in 2017; our revised Ebitda and P/E for those years are USD 14.4bn, USD15.3bn, USD18.8bn and 10.9x, 10.7x, and 7.2x, respectively, putting our Ebitda estimates ~17% below Bloomberg consensus. Our base case includes a royalty increase to 4% as of 1Q16 (from 2H15), which we believe is fairly priced in. The Special Participation Tax (SPT) is not in our base case, although we do not rule it out. We maintain a Neutral rating on the name and decrease our target price to US$ 12.5/ADR from US$ 15/ADR.” Vale SA closed on Monday at $11.44.
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Posted In: Analyst ColorPrice TargetAnalyst RatingsCredit SuisseIvano Westin
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