Citi Is Bullish On Copper By Shuli Ren
Copper is one of Citi Research‘s favorite industrial metals, because in 2017, we are likely to see
copper’s first supply deficit since 2011.
Analyst Ada Gao and team wrote:
In 2016, Chinese copper demand grew strongly at 3-7%, compared to consensus expectations of 1-2% at the start of the year. Looking forward, we see demand slightly moderating, but to a still-solid 3-4%.
Mine supply is expected to slow notably, from 3.2%YoY in 2016E to 1.1% in 2017E, thus creating the first supply deficit since 2011.
On our forecasts, copper prices will US$2.53/2.76/3.03 per lb in 2017/18/19E, respectively, or US$5,575/6,075/6,675 in US$/t terms.
Overnight, copper rose 1.7% to $5,895 per ton.
Of the Chinese miners, MMG (1208.Hong Kong) is Citi Research’s top pick, because it is the purest copper miner with 83% of its revenue from copper mines. Citi estimates that for every 5% rise in copper prices, MMG’s earnings can rise by 27.9%.
By comparison, China Moly (3993.Hong Kong) and Jiangxi Copper (358.Hong Kong) get only 13.7% and 13.8% lift. Zijin Mining (2899.Hong Kong) gets 5.2% boost only. (See chart)
Citi has a price target of 3.60 Hong Kong dollars for MMG. This stock soared 4.7% today to HK$2.89. Citi’s price target implies an up-cycle of 2.5 times 2017 book. MMG currently trades just above 1.7 times book, or its long-term average.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... on-copper/
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