Barclays says sell Vale, overly exposed to iron ore prices


Vale (VALE -1%) is tagged with a Sell rating and $13 price target at Barclays, which cites overexposure to iron ore prices.

92% of Vale’s earnings, or 77% of its net present value, comes from iron ore; a 10% change in the iron ore price would reduce Vale’s NPV by 49% and 2014 earnings by 32%, according to Barclays.

The firm's price profile assumes iron ore $105/ton in 2014 retreating to $90/ton by 2016, resulting in Vale’s earnings falling 51% by 2016 vs. 2013.

Barclays ranks Vale near the bottom of global peers BHP, RIO and Anglo American (AAUKY.PK, AAUKF.PK) on all key metrics including production growth, free cash flow generation, earnings growth, gearing, return on equity and return on invested capital.

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Comments (2)
  • petergrt
    , contributor
    Comments (535) | Send Message
     
    That's as saying that GM is too dependent upon selling automobiles . . .

     

    My rating: buy, target $30.

     

    I am very long on VALE.
    4 Oct 2013, 04:01 PM Reply Like
  • michaelrycroft
    , contributor
    Comment (1) | Send Message
     
    I don't think that's the best analogy, GM have a range of products. If demand for one decreases that doesn't necessarily effect demand for all. Iron Ore is Iron Ore.
    8 Oct 2013, 10:37 AM Reply Like
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