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1、Buy,Deutsche BankMarkets Research,Global Emerging MarketsBrazilMetals&Mining,IndustryLatam Metals&Mining,Date1 November 2012Forecast ChangeRodrigo Barros,Vale and Bradespar:Updating CapexestimatesVale and Bradespar:3Q12 and Capex updateIn this report we finetune our forecasts for Vale and Bradespar
2、to incorporate3Q12 results,new capex estimates and,in the case of Bradespar,review themethodology for valuing CPFL.Our 12-month target price for VALE remainsunchanged at USD24/ADR and in the case of Bradespar our new TP is BRL40.We maintain our Buy rating on both companies.Capex now estimated at USD
3、16.4bn in 2013Vales management made it clear in the companys 3Q12 earnings call that thecompany will reduce capex in the years ahead.Our model now assumes capexof USD17.0bn for 2012(-10%vs prior)and USD16.4bn for 2013(-26%vs prior)as we basically postponed all non-iron ore projects disbursements.We
4、expectVale to announce further details of its capex plan on December 3rd,2012during its annual Investor day to be held in New York.,Research Analyst(+55)11 2113-Leandro CappaResearch Analyst(+55)11 2113-Jorge Beristain,CFAResearch Analyst(+1)203 863-Companies FeaturedVale(VALE.N),USD18.86,Dividend i
5、n 2013 estimated at USD3.4bn(3.6%yield)In our calculations Vale would have to pay USD3.4bn in dividends next year,EPS(USD),2011A 2012E 2013E4.43 1.88 1.89,(3.6%yield)so that its controlling shareholder,Valepar,is able to pay theprincipal and interest associated with redeemable shares issued in 2008.
6、Such,P/E(x)EV/EBITDA(x),6.75.1,10.06.9,10.06.4,shares provided the funds that Valepar used to participate in Vales equityoffering in the same year.,BRADESPAR(BRAP4.SA),BRL30.00 Buy2011A 2012E 2013E,Valuation and RisksWe value Latam Mining stocks using the discounted cash flow methodology.For the WAC
7、C calculation,we assume a 5%market risk premium and a 3%,EPS(BRL)P/E(x)EV/EBITDA(x),5.786.76.5,2.5511.810.3,2.5511.89.5,risk-free rate.Key risks include currency,project delays,overpaying foracquisitions,and slower-than-expected global economic growth.For furtherinformation on risks and valuation,pl
8、ease see pages 2 and 6.This reportchanges ratings,price targets,and/or estimates for companies under coverage.For a detailed listing of these changes,see pages 4 and 8._Deutsche Bank Securities Inc.All prices are those current at the end of the previous trading session unless otherwise indicated.Pri
9、ces are sourcedfrom local exchanges via Reuters,Bloomberg and other vendors.Data is sourced from Deutsche Bank and subjectcompanies.Deutsche Bank does and seeks to do business with companies covered in its research reports.Thus,investors should be aware that the firm may have a conflict of interest
10、that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.DISCLOSURES ANDANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072/04/2012.,1 November 2012Metals&MiningLatam Metals&MiningValeOutlookVale is the
11、 worlds largest producer of iron ore and pellets.The companys revenuecomposition by destination has historically been well diversified:50%of 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 toinfrastruc
12、ture investment in China,20%of Vales revenues come from non-ferrousmetals,which provide exposure to the recovery in OECD economies.Based on 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 f
13、ollowing months.ValuationOur target price is calculated using a DCF methodology(9.40%WACC,11.50%Ke,1.3company beta,5%market risk premium,5%risk free rate,30%debt in the capitalstructure,6%pre-tax Kd and 2.5%terminal growth(based on our knowledge of theasset base and expectations of long-term growth)
14、.RisksDownside risks to our outlook include lower-than-expected realized iron ore prices,lower economic and fixed asset investment growth in China,sustainability of industrialproduction recovery in developed countries,changes in global stainless steelproduction,execution risk on several large-scale
15、growth projects,Brazilian,Indonesianand Canadian political,economic and country risks,sharp revaluation of the Brazilianreal and Canadian dollar and the downside risk of overpaying for assets in prospectiveM&A activity.,Page 2,Deutsche Bank Securities Inc.,24,20,30,1 November 2012Metals&MiningLatam
16、Metals&Mining,Model updated:01 November 2012,Fiscal year end 31-Dec,2009,2010,2011,2012E,2013E,2014E,Running the numbers,Financial Summary,Latin 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
17、.431.7415.042.6,1.881.881.1715.702.2,1.891.890.6616.882.1,2.272.270.6618.501.7,Reuters:VALE.NBuyPrice(1 Nov 12)Target Price52 Week rangeMarket Cap(m),Bloomberg:VALE UNUSD 18.86USD 24.00USD 15.88-26.61EURm 74,922,P/E(DB)(x)P/E(Reported)(x)P/BV(x)FCF yield(%)Dividend yield(%)EV/SalesEV/EBITDAEV/EBIT,1
18、9.519.52.7nm2.64.913.119.0,9.19.12.7nm1.93.86.97.9,6.76.71.47.55.92.85.15.8,10.010.01.22.06.22.76.99.2,10.010.01.1nm3.52.66.48.4,8.38.31.04.43.52.35.36.8,USDm 96,928,Income Statement(USDm),Company ProfileVale is a major diversified mining and logistics companyand the worlds largest producer of iron
19、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%logistics holding.Vales integratedrailroads,ports and other holdings transport over two-thirds of Brazils rail cargo.Over 80%of Vales revenuesare US dollar denomina
20、ted and approximately 60%ofcosts are BRL denominated,so margins benefit most in aweak BRL environment.Vale is headquartered in Rio deJaneiro BrazilPrice Performance40363228,SalesEBITDAEBITPre-tax profitNet incomeCash Flow(USDm)Cash flow from operationsNet CapexFree cash flowEquity raised/(bought bac
21、k)Dividends paidNet inc/(dec)in borrowingsOther investing/financing cash flowsNet cash flowChange in working capital,23,3118,7796,0577,5565,3496,811-10,048-3,2370-2,7552,181-2,423-6,234132,45,29324,95521,69521,30117,26417,006-18,899-1,8930-3,000-4422,138-3,197-4,244,58,99032,72128,59927,93422,88527,
22、448-16,07511,3730-9,000-2,882-3,956-4,4659,43,43517,04012,7459,8279,68018,997-17,0151,9820-6,0003,799-6,964-7,1822,295,46,92219,47514,68312,9279,72915,421-16,439-1,0180-3,4005,6533551,589-971,55,56123,70818,42015,60111,71718,104-13,8484,2560-3,400-1,428365-206-1,856,Balance Sheet(USDm),1612Nov 10,Ma
23、y 11,Nov 11,May 12,Cash and cash equivalentsProperty,plant&equipmentGoodwill,11,04067,6372,313,9,37783,0963,317,3,53188,8953,026,2,24796,8472,973,3,836108,4942,973,3,630117,0542,973,ValeMargin Trends605040,BOVESPA(Rebased),Other assetsTotal assetsDebtOther liabilitiesTotal liabilitiesTotal sharehold
24、ers equityNet debt,21,289102,27922,88018,90241,78260,49711,840,33,349129,13924,41432,28456,69872,44115,037,33,276128,72823,03325,58148,61480,11419,502,32,168134,23528,93122,68051,61182,62426,684,34,016149,31936,93123,32160,25289,06833,095,37,224160,88138,93124,42963,36097,52035,301,Key Company Metri
25、cs,20,09,10,11,12E,13E,14E,Sales growth(%)DB EPS growth(%),-37.7-61.6,94.3221.5,30.235.9,-26.4-57.5,8.00.2,18.420.4,EBITDA MarginGrowth&Profitability150100500-50,EBIT Margin,35302520151050,Payout ratio(%)EBITDA Margin(%)EBIT Margin(%)ROE(%)Net debt/equity(%)Net interest cover(x)DuPont AnalysisEBIT m
26、argin(%),51.537.726.010.819.6nm26.0,17.455.147.927.420.815.747.9,39.355.548.531.224.38.648.5,62.039.229.312.232.33.529.3,34.941.531.311.637.26.331.3,29.042.733.212.936.25.433.2,09,10,11,12E,13E,14E,x Asset turnover(x),0.3,0.4,0.5,0.3,0.3,0.4,x Financial cost ratio(x),1.2,0.9,0.9,0.7,0.8,0.8,Solvency
27、40302010,Sales growth(LHS),ROE(RHS),2015105,x Tax and other effects(x)=ROA(post tax)(%)x Financial leverage(x)=ROE(%)annual growth(%)x NTA/share(avg)(x)=Reported EPSannual growth(%),0.85.91.810.8-69.29.41.01-61.6,0.814.91.827.4155.211.93.26221.5,0.917.71.831.213.814.24.4335.9,1.17.41.712.2-60.815.41
28、.88-57.5,0.86.91.711.6-5.116.31.890.2,0.87.61.712.910.817.72.2720.4,0,0,Source:Company data,Deutsche Bank estimates,09,10,11,12E,13E,14E,Net debt/equity(LHS)Rodrigo Barros+55 11 2113-5964,Net interest cover(RHS),Deutsche Bank Securities Inc.,Page 3,1 November 2012Metals significant changes to CapexW
29、e are updating our Vale model mainly to incorporate new Capex assumptions.Ourtarget price remains unchanged at USD24.Our EBITDA estimates for Vale are flat atUSD17bn for 2012 and USD19.5bn for 2013.Our EPADR estimates are currentlyUSD1.88 for 2012(-10%vs prior)and USD1.89 for 2013(-10%vs prior).The
30、mainreason for the downward revision in EPADR is that we revised down our Equity Incomeestimates due to lower profitability expected from non-core businesses.The key updates that we implemented to our model are:Capex:Our model assumes capex of USD17.0bn for 2012(-10%vs prior)andUSD16.4bn for 2013(-2
31、6%vs prior)as we basically postponed all non-iron oreprojects disbursements as shown in Figure 2 below.We expect Vale toannounce further details of its Capex plan on December 3rd,2012 during itsannual Investor day to be held in New York.Potash:We now forecast the Rio Colorado potash project in Argen
32、tina will startramping up from 2016 onwards(vs.2H14 before).Figure 1:Vale earnings revision summary,(USGAAP),Current,Previous,Chg,(USDm)RevenuesEBITDAEBITDA marginSelling,general&adminOperating profitNet fin.gain(exp)incl.FXPre-tax profitTax rateNet majority incomeEPADR(USD)DPADR(US$)Net debt(cash)I
33、ron ore volume(mtons)Avg iron ore price(USD/mton)Cash cost(USD/mton)Nickel volume(000 mtons)Nickel price(USD/lb)Capex,2012E43,43517,04039.2%7,36912,745-3,6199,1274%9,6801.881.1726,684296100.841.12228.1417,015,2013E46,92219,47541.5%7,20014,683-2,34712,33625%9,7291.890.6633,09530399.640.12708.6316,439
34、,2014E55,56123,70842.7%7,40518,420-3,42814,99325%11,7172.270.6635,301341102.740.14109.2113,848,2012E44,03817,36239.4%6,98813,049-3,3909,6596%10,7502.091.1729,597299100.342.42458.1819,014,2013E47,40419,45641.0%7,20714,429-3,24611,18325%10,7752.090.6641,28731099.440.12708.7822,255,2014E56,87824,17842.
35、5%7,40518,475-4,83013,64525%12,8952.500.6644,459349102.640.14109.3615,552,2012E-1.4%-1.9%-19bp5.5%-2.3%6.7%-5.5%-193.2bp-10.0%-10.0%0.0%-9.8%-1.1%0.5%-3.1%-9.4%-0.5%-10.5%,2013E-1.0%0.1%46bp-0.1%1.8%-27.7%10.3%0.0bp-9.7%-9.7%0.0%-19.8%-2.2%0.1%0.1%0.0%-1.7%-26.1%,2014E-2.3%-1.9%16bp0.0%-0.3%-29.0%9.
36、9%0.0bp-9.1%-9.1%0.0%-20.6%-2.2%0.1%0.1%0.0%-1.7%-11.0%,Source:Deutsche Bank and company data,Page 4,Deutsche Bank Securities Inc.,1 November 2012Metals&MiningLatam Metals&MiningCapex revisionFigure 2:Capex by project,USDmn,Current,Previous,2012,2013,2014,2015,2016,2017,2012,2013,2014,2015,2016,2017
37、,MaintenanceR&D,4,4002,400,4,0001,500,5,0002,354,5,0002,354,5,0002,354,5,0002,354,6,0992,400,5,0002,354,5,0002,354,5,0002,354,5,0002,354,5,0002,354,Iron ore mining&logistics,Carajas+40CLN 150,622890,1,046787,622890,1,046787,Carajas Serra Sul S11DCLN S11DEagle Downs,79432187,1,6102,716190,1,6102,7161
38、90,1,6102,716190,1,6102,716190,79432187,1,6102,716190,1,6102,716190,1,6102,716190,1,6102,716190,Konkola NorthSerra LesteConceicao ItabiritosVargem Grande Itabiritos,13239184429,165160806788,13239184429,165160806788,Conceicao Itabiritos II,297,414,414,297,414,414,Simandou ZogotaTeluk Rubiah,380367,10
39、0300,200300,300284,250,380367,440442,410442,Pellet plants,Tubarao VIII,239,182,239,182,Coal mining&logistics,Moatize IINacala Corridor,499691,200400,350800,4001,200,4761,345,499691,7851,873,6421,873,Copper mining,Salobo,296,141,296,141,Salobo II,581,250,328,581,578,Nickel mining,Long HarbourTotten,1
40、,208157,500244,500,92,1,208157,1,092244,Potash,Rio Colorado,1,081,1,100,1,100,1,100,484,1,081,2,163,1,622,Energy,Biodiesel,227,40,40,40,227,40,40,40,Steelmaking,CSP,563,300,300,300,289,563,594,594,594,Other,2,450,2,750,Total,17,015,16,439,13,848,13,232,12,360,5,000,19,014,21,255,15,552,10,151,9,516,
41、5,000,Source:Deutsche Bank and company data,Deutsche Bank Securities Inc.,Page 5,1 November 2012Metals&MiningLatam Metals&MiningBradesparOutlookWe believe Bradespar should reflect the same positive outlook that we have for Vale,as91%of its gross value comes from its equity investment in this company
42、.In ouropinion,Bradespar is undervalued compared to its net asset value and we expect itsrelative performance in relation to Vale to improve due to increasing awareness of thereal options that exist for the company-higher dividend yield in case of debt rollover orthe sale of its stake in CPFL and th
43、e incorporation of a control premium because of itsdirect participation in Vales management.We have a Buy rating on the company.ValuationWe calculate our 12-month price target for Bradespar by applying a 5%liquiditydiscount to its net asset value,which is comprised of equity stakes in Vale and CPFL,
44、reduced by BRL669m of net debt and BRL130m of holding company expenses(atpresent value).RisksThe key downside risks to our estimates mostly reflect the risks that apply to Vale,including:1)lower-than-expected realized iron ore prices,2)lower economic and fixedasset investment growth in China,and 3)t
45、he sustainability of industrial productionrecovery in developed countries.To a lesser extent,changes in the energy distributionregulatory model and lower energy prices could also affect Bradespars valuation.,Page 6,Deutsche Bank Securities Inc.,1 November 2012Metals&MiningLatam Metals&MiningBradespa
46、r:discount to NAV currently at 14%We rate BRAP4 a Buy and we believe it is undervalued compared to its net asset value.Currently,the NAV discount is at 14%.We changed our target price to BRL40 fromBRL47 mainly to incorporate the recent modifications we implemented to our Valemodel and the new method
47、ology we are using to value CPFL(not rated).The key building blocks of Bradespars sum-of-the-parts valuation are the following:Equity stakes:We estimate the fair value of Bradespars participations in Valeand CPFL at BRL15.5bn.This valuation is based on our target price for Vale ofUSD24 and for CPFL
48、of BRL27.For CPFL contribution to BRADESPAR TargetPrice and earnings,we use Bloomberg Finance LP consensus.Net debt:We estimate that the current net debt of Bradespar is BRL669m.NPV of expenses:We also deduce from the NAV calculation the likely netpresent value of Bradespars holding company expenses
49、,which we estimate atBRL130m.Liquidity discount:After calculating Bradespars net asset value,we apply a 5%liquidity discount in order to calculate our fair market capitalization estimate ofBRL14.7bn,which implies BRL40 for BRAP4 shares.Figure 3:Bradespars target price calculation,#shares(000),quote(
50、BRL),market value(000),VALE ONVALE PNACPFL ONValue of AssetsCash(estimated)Gross DebtNet DebtNPV of ExpensesNet Asset ValueLiquidity DiscountFair Market Cap,299,3813,54850,542349,548,47472740,14,011,012166,0321,369,68315,546,728219,386(888,193)(668,807)(130,000)14,747,9215%14,010,525,Source:Deutsche
