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1、Hold,9.3,6.1,Hold,Deutsche BankMarkets Research,Global Emerging MarketsBrazilMetals&Mining,IndustryLatam Metals&Mining,Date8 January 2013Forecast ChangeRodrigo Barros,Commodities price update;4Q12mining previewMore bullish on iron ore;Incorporating Vales provisionsIn this report,we incorporate Deuts
2、che Banks most recent commodities priceassumptions into our models.In the case of Vale,we now assume that iron oreprices will average USD125/dmt in 2013(+8%)and USD115/dmt in 2014(-4%).We also incorporate the impacts disclosed by the company during December2012,mainly non-cash effects amounting to U
3、SD4.4bn.On Copper,we alsorevise our forecasts up to USD3.69/lb in 2013(+2%)and to USD3.40/lb in 2014(flat).Our target prices and ratings remain unchanged at this time.Vale:Stronger iron ore prices to boost 2013 earningsOur new commodity price assumptions led us to revise Vales EPADRestimates to USD2
4、.26 for 2013(+20%vs.prior)and USD1.98 for 2014(-13%).EBITDA forecasts increased to USD21.8bn for 2013(+19%)and decreased to,Research Analyst(+55)11 2113-Leandro CappaResearch Analyst(+55)11 2113-Jorge Beristain,CFAResearch Analyst(+1)203 863-Companies Featured,USD21.3bn for 2014(-10%).We maintain ou
5、r expectation of a minimumdividend of USD3.4bn for the full year.Our USD 24 TP remains unchanged.Please see our updated 4Q12 earnings preview in page 8 of this report.,Vale(VALE.N),USD21.07EPS(USD),Buy2011A 2012E 2013E4.43 1.21 2.26,Copper price revised upwards,more conservative on precious metalsAl
6、though copper forecasts increased by 2%for 2013,the main SouthernCoppers byproducts price projections were reduced.Silver decreased by 17%to USD36.6/oz and gold was lowered by 12%to USD1,856/oz for 2013.,P/E(x)6.7 17.5EV/EBITDA(x)5.1 7.1Southern Copper(SCCO.N),USD39.082011A 2012E 2013E,Consequently,
7、for Southern Copper,we decrease 2013E EPS to USD2.67(-1%)and 2014E EPS to USD2.42(-3%).For Grupo Mexico,we forecast 2013 EPS ofUSD0.32(flat)and 2014 EPS of USD0.30(-3%).Please see our 4Q12 earningspreview in pages 13 and 18 of this report.,EPS(USD)P/E(x)EV/EBITDA(x),2.7612.67.9,2.2517.310.1,2.6714.7
8、8.8,Valuation and risksWe value Latam Mining stocks using the discounted cash flow methodology.,Grupo Mexico(GMEXICOB.MX),MXN48.822011A 2012E 2013E,For the WACC calculation,we assume a 5%market risk premium and a 3%risk-free rate.Key risks include currency,project delays,overpaying foracquisitions,a
9、nd slower-than-expected global economic growth.For further,EPS(USD)P/E(x)EV/EBITDA(x),0.3110.35.5,0.2813.57.1,0.3212.06.2,information on risks and valuation,please see pages 5,11,15 and 19.This report changes ratings,price targets,and/or estimates for severalcompanies under coverage.For a detailed l
10、isting of these changes,see page 4._Deutsche Bank Securities Inc.Deutsche Bank does and seeks to do business with companies covered in its research reports.Thus,investors shouldbe aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors shouldcon
11、sider this report as only a single factor in making their investment decision.DISCLOSURES AND ANALYSTCERTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072/04/2012.,8 January 2013Metals&MiningLatam Metals&MiningTable of ContentsNew commodities prices.3Summary.3Target prices and earnings revision summar
12、y.4Vale.5Outlook.5Valuation.5Risks.5Earnings revisions:increase in iron ore price estimates impact 2012 and 2013 forecasts.74Q12 preview.8Southern Copper.11Outlook.11Valuation.11Risks.11Copper forecasts change little.134Q12 preview.13Grupo Mexico.15Outlook.15Valuation.15Risks.15Earnings revision.174
13、Q12 preview.18Bradespar.19Outlook.19Valuation.19Risks.19Bradespar:discount to NAV currently at 13%.21Discount calculation.22Earnings revision.22Appendix A:Deutsche Bank commodity price revisions.23,Page2,Deutsche Bank Securities Inc.,8 January 2013Metals&MiningLatam Metals&MiningNew commodities pric
14、esSummaryIn this report,we update our forecasts for Southern Copper,Grupo Mexico,Vale andBradespar to reflect Deutsche Banks new commodity price assumptions among otherchanges which we list in each companys section.We now assume that iron ore price will average USD125/dmt in 2013(+8%)andUSD115/dmt i
15、n 2014(-4%)which directly reflects to Vales earnings estimates.For Copper,we also revised our forecasts up for 2013 to USD3.69/lb(+2%vs.previous)and maintained it unchanged for 2014 at USD3.40/lb.Below is a summary of Deutsche Banks new commodities prices.Figure 1:Commodities price revision summary,
16、Current,Previous,Change,2013E,2014E,2015E,2013E,2014E,2015E,2013E,2014E,2015E,Iron ore(USD/t)Copper(USD/lb)Nickel(USD/lb)Molybdenum(USD/lb)Gold(USD/oz)Silver(USD/oz)Hard coking coal(USD/t),125.03.698.114.01,85636.6178,115.03.407.716.01,90038.0185,110.03.297.315.51,80036.0180,116.33.638.514.02,11344.
17、0183,120.03.409.116.02,00040.0200,110.03.238.915.51,75634.0188,8%2%-5%0%-12%-17%-3%,-4%0%-15%0%-5%-5%-8%,0%2%-18%0%3%6%-4%,Source:Deutsche Bank,Deutsche Bank Securities Inc.,Page3,8 January 2013Metals&MiningLatam Metals&MiningTarget prices and earnings revision summaryFigure 2:Recommendation and tar
18、get price summary,Company,Ticker,Recommen Old rec,Crncy,New TP,Old TP,Change,TP basis,Close price,Upside,dation,(04-Jan-13),ValeGrupo MexicoSouthern CopperBradespar,VALE.NGMEXICOB.MXSCCO.NBRAP4.SA,BuyHoldHoldBuy,BuyHoldHoldBuy,USDMXNUSDBRL,24514240,24514240,0%0%0%0%,DCFNAVDCFNAV,20.9348.2539.1033.20
19、,15%6%7%20%,Source:Deutsche Bank and Bloomberg Finance LPFigure 3:Earnings revision summary,Current,Previous,Change,2012E,2013E,2014E,2012E,2013E,2014E,2012E,2013E,2014E,Vale,EBITDA(USDm)EPADR(USD),13,7901.21,21,7652.26,21,2611.98,17,0401.88,19,4751.89,23,7082.27,-19%-36%,12%19%,-10%-13%,Southern Co
20、pper,EBITDA(USDm)EPS(USD),3,4422.25,3,9682.67,3,7322.42,3,5202.31,4,0282.71,3,8282.50,-2%-3%,-1%-1%,-3%-3%,Grupo Mexico,EBITDA(USDm)EPS(USD),4,6780.28,5,3350.32,5,1330.30,4,7680.29,5,3790.32,5,2090.31,-2%-3%,-1%0%,-1%-3%,Bradespar,EBITDA(Brlm)EPS(BRL),7871.93,1,3693.68,1,1873.23,1,0822.74,1,1643.07,
21、1,3823.68,-27%-30%,19%20%,-12%-12%,Source:Deutsche Bank,Page4,Deutsche Bank Securities Inc.,8 January 2013Metals&MiningLatam Metals&MiningValeOutlookVale is the worlds largest producer of iron ore and pellets.The companys revenuecomposition by destination has historically been well diversified:50%of
22、 grossrevenues from Asia,20%from Europe,20%from South America and 5%fromNorth America.In addition to its iron ore exposure,which is directly linked toinfrastructure investment in China,20%of Vales revenues come from non-ferrousmetals,which provide exposure to the recovery in OECD economies.Based on
23、itsprospects,we have a Buy rating on the stock.We believe the licensing process of theCarajas Serra Sul project is one of the key drivers for the stock in the following months.ValuationOur target price is calculated using a DCF methodology(9.40%WACC,11.50%Ke,1.3company beta,5%market risk premium,5%r
24、isk free rate,30%debt in the capitalstructure,6%pretax Kd and 2.5%terminal growth(based on our knowledge of theasset base and expectations of long-term growth).RisksDownside risks to our outlook include lower-than-expected realized iron ore prices,lower economic and fixed asset investment growth in
25、China,sustainability of industrialproduction recovery in developed countries,changes in global stainless steelproduction,execution risk on several large-scale growth projects,Brazilian,Indonesianand Canadian political,economic and country risks,sharp revaluation of the Brazilianreal and Canadian dol
26、lar and the downside risk of overpaying for assets in prospectiveM&A activity.,Deutsche Bank Securities Inc.,Page5,24,20,30,8 January 2013Metals&MiningLatam Metals&Mining,Model updated:07 January 2013,Fiscal year end 31-Dec,2009,2010,2011,2012E,2013E,2014E,Running the numbers,Financial Summary,Latin
27、 AmericaBrazilMetals&MiningVale,DB EPS(USD)Reported EPS(USD)DPS(USD)BVPS(USD)Valuation MetricsPrice/Sales(x),1.011.010.5210.794.5,3.263.260.5713.013.5,4.434.431.7415.042.6,1.211.211.1715.022.4,2.262.260.6616.582.2,1.981.980.4918.062.1,Reuters:VALE.NBuyPrice(4 Jan 13)Target Price52 Week rangeMarket C
28、ap(m),Bloomberg:VALE UNUSD 21.07USD 24.00USD 15.88-26.61EURm 82,060,P/E(DB)(x)P/E(Reported)(x)P/BV(x)FCF yield(%)Dividend yield(%)EV/SalesEV/EBITDAEV/EBIT,19.519.52.7nm2.64.913.119.0,9.19.12.7nm1.93.86.97.9,6.76.71.47.55.92.85.15.8,17.517.51.41.75.52.97.19.3,9.39.31.31.43.12.76.17.7,10.610.61.22.72.
29、32.66.48.4,USDm 108,286,Income Statement(USDm),Company ProfileVale is a major diversified mining and logistics companyand the worlds largest producer of iron ore and pellets(72%of 2010 sales).The company expanded into nickel&copper with the acquisition of Inco in 2006 and it alsomaintains a 5%logist
30、ics holding.Vales integratedrailroads,ports and other holdings transport over two-thirds of Brazils rail cargo.Over 80%of Vales revenuesare US dollar denominated and approximately 60%ofcosts are BRL denominated,so margins benefit most in aweak BRL environment.Vale is headquartered in Rio deJaneiro B
31、razilPrice Performance40363228,SalesEBITDAEBITPre-tax profitNet incomeCash Flow(USDm)Cash flow from operationsNet CapexFree cash flowEquity raised/(bought back)Dividends paidNet inc/(dec)in borrowingsOther investing/financing cash flowsNet cash flowChange in working capital,23,3118,7796,0577,5565,34
32、96,811-10,048-3,2370-2,7552,181-2,423-6,234132,45,29324,95521,69521,30117,26417,006-18,899-1,8930-3,000-4422,138-3,197-4,244,58,99032,72128,59927,93422,88527,448-16,07511,3730-9,000-2,882-3,956-4,4659,44,86418,19513,90110,9826,19618,891-17,0151,8760-6,0003,799-6,964-7,2891,322,49,93621,76517,17415,5
33、0511,63417,972-16,4391,5330-3,4003,7393552,228-64,52,55721,26116,16613,56510,20416,756-13,8482,9080-2,551-1,209365-487-1,266,Balance Sheet(USDm),16,Cash and cash equivalents,11,040,9,377,3,531,2,140,4,368,3,881,121 11,7 11,1 12,7 12,Property,plant&equipmentGoodwill,67,6372,313,83,0963,317,88,8953,02
34、6,92,5062,973,104,3552,973,113,1072,973,ValeMargin Trends605040,BOVESPA(Rebased),Other assetsTotal assetsDebtOther liabilitiesTotal liabilitiesTotal shareholders equityNet debt,21,289102,27922,88018,90241,78260,49711,840,33,349129,13924,41432,28456,69872,44115,037,33,276128,72823,03325,58148,61480,1
35、1419,502,33,696131,31628,93123,23552,16679,14926,791,34,121145,81734,93123,35958,29087,52630,563,36,394156,35636,93124,12361,05495,30133,050,Key Company Metrics,20,09,10,11,12E,13E,14E,Sales growth(%)DB EPS growth(%),-37.7-61.6,94.3221.5,30.235.9,-23.9-72.8,11.387.3,5.2-12.3,EBITDA MarginGrowth&Prof
36、itability150100500-50,EBIT Margin,35302520151050,Payout ratio(%)EBITDA Margin(%)EBIT Margin(%)ROE(%)Net debt/equity(%)Net interest cover(x)DuPont AnalysisEBIT margin(%),51.537.726.010.819.6nm26.0,17.455.147.927.420.815.747.9,39.355.548.531.224.38.648.5,96.840.631.08.033.83.831.0,29.243.634.414.334.9
37、7.634.4,25.040.530.811.434.75.030.8,09,10,11,12E,13E,14E,x Asset turnover(x),0.3,0.4,0.5,0.3,0.4,0.3,x Financial cost ratio(x),1.2,0.9,0.9,0.7,0.9,0.8,Solvency40302010,Sales growth(LHS),ROE(RHS),2015105,x Tax and other effects(x)=ROA(post tax)(%)x Financial leverage(x)=ROE(%)annual growth(%)x NTA/sh
38、are(avg)(x)=Reported EPSannual growth(%),0.85.91.810.8-69.29.41.01-61.6,0.814.91.827.4155.211.93.26221.5,0.917.71.831.213.814.24.4335.9,0.64.81.78.0-74.415.11.21-72.8,0.88.41.714.378.915.82.2687.3,0.86.81.711.4-20.117.31.98-12.3,0,0,Source:Company data,Deutsche Bank estimates,09,10,11,12E,13E,14E,Ne
39、t debt/equity(LHS)Rodrigo Barros+55 11 2113-5964Page6,Net interest cover(RHS),Deutsche Bank Securities Inc.,8 January 2013Metals&MiningLatam Metals&MiningEarnings revisions:increase in iron ore price estimates impact2013 and 2014 forecastsWe are updating our Vale model to incorporate our new commodi
40、ty price assumptions.Our EPADR estimates are currently USD2.26 for 2013(+20%vs.prior)and USD1.98 for2014(-13%vs.prior).Our revised EPADR estimates are 9%above and 14%belowBloomberg Finance LP consensus estimates of USD2.07 and USD2.29 for 2013 and2014,respectively.Iron Ore:We project that Vale will
41、sell 303mt of iron ore in 2013(unchanged)and 341mt in 2014(unchanged),including pellets.We estimate 2013 realizedprices for non-agglomerated products at USD101/wmt and for pellets atUSD137/wmt.We estimate the average iron ore price at USD108/wmt FOBBrazil for 2013(+8%vs.prior)and at USD98/wmt FOB fo
42、r 2014(-4.5%vs.prior).Nickel:We assume that Vale will sell 270kt of nickel in 2013(unchanged)and410kt in 2014(unchanged).Our average price assumption for 2013 isUSD8.17/lb(-5%vs.prior)and for 2014 is USD7.82/lb(-15%vs.prior).Copper:We assume copper sales of 331kt for 2013(unchanged),at an averagepri
43、ce of USD3.71/lb(+2%vs.prior).For 2014,we assume an average price ofUSD3.42/lb(unchanged).Our new EBITDA estimates for Vale are USD21.8bn(+12%vs.prior)for 2013 andUSD21.3bn(-10%vs.prior)for 2014.For Vale,in addition to the commodities revision,we also incorporated the impactsdisclosed by the company
44、 during December 2012,mainly non-cash effects amountingto USD4.4bn,which we list below:USD2.85bn impairment in Onca Puma(nickel assets).Non-cash impact in the4Q12 results.USD1.3bn write down related to its 22%equity stake in Norsk Hydro(aluminum assets).Non-cash impact in the 4Q12.BRL528mn provision
45、 related to the settlement of a Brazilian VAT litigation(ICMS).BRL260mn cash effect in the 4Q12.To measure the impact on the bottom line,we considered a 34%tax benefit for the VATligation.The total effect on the net income was negative in USD4.3bn in the 4Q12.We believe that doing these impairments
46、in 2012 is a positive development for Vale,asthe alternative would have been a negative impact on earnings in 2013 that couldimpact dividends next year.,Deutsche Bank Securities Inc.,Page7,8 January 2013Metals&MiningLatam Metals&MiningFigure 4:Vale earnings revision summary,(USGAAP),Current,Previous
47、,Change,(USDm),2012E,2013E,2014E,2012E,2013E,2014E,2012E,2013E,2014E,Revenues,44,864 49,936 52,557 43,435 46,922 55,561,3.3%,6.4%,-5.4%,EBITDA,13,790 21,765 21,261 17,040 19,475 23,708-19.1%,11.8%,-10.3%,EBITDA margin,30.7%,43.6%,40.5%,39.2%,41.5%,42.7%,133bp,208bp,-222bp,EBITDA adjusted by non-,18,
48、195 21,765 21,261 17,040 19,475 23,708,6.8%,11.8%,-10.3%,recurring,Net majority income,6,196,11,634 10,204,9,680,9,729,11,717-36.0%,19.6%,-12.9%,EPADR(USD)EPADR(USD)adjusted by non-,1.212.05,2.262.26,1.981.98,1.881.88,1.891.89,2.272.27,-36.0%8.8%,19.6%19.6%,-12.9%-12.9%,recurring,Net debt(cash),26,7
49、91 30,563 33,050 26,684 33,095 35,301,0.4%,-7.6%,-6.4%,Iron ore volume(mtons)Avg iron ore price(USD/mton)Cash cost(USD/mton)Nickel volume(000 mtons)Nickel price(USD/lb)Copper volume(000 mtons)Copper price(US$/lb),298104.741.12228.082693.54,303107.740.22708.173313.71,34198.142.34107.824013.42,296100.
50、841.12228.142693.56,30399.640.12708.633313.65,341102.740.14109.214013.42,0.9%3.8%0.0%0.0%-0.6%0.0%-0.6%,0.0%8.1%0.0%0.0%-5.3%0.0%1.6%,0.0%-4.5%5.3%0.0%-15.0%0.0%-0.1%,Capex,17,015 16,439 13,848 17,015 16,439 13,848,0.0%,0.0%,0.0%,Source:Company data and Deutsche Bank4Q12 previewWe expect Vale to rep
