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1、40,36,32,28,24,20,16,12,Vale,Deutsche BankMarkets Research,RatingBuyGlobal Emerging MarketsBrazil,CompanyVale,Date25 October 2012Results,Metals&Mining,Price at 24 Oct 2012(USD)Target price,17.4424.00,ReutersVALE.N,BloombergVALE UN,Exchange TickerNYSVALE,52-week range,26.62-15.88,Better than expected
2、 3Q12;Surprisedeal on VNCPositive operating results;Recurring EBITDA 18%above estimatesVale reported last night its 3Q12 results which were better than we projected:EBITDA of USD4.3bn(excluding provisions)was 18%above our forecast ofUSD3.6bn,driven by higher than expected pellet prices,lower iron or
3、e cashcosts and higher than expected base metals volumes.Recurring EPADR ofUSD0.39 was in line with expectations,as the higher EBITDA was offset byhigher financial expenses than we estimated.We rate Vale as a Buy due toupside to our DCF valuation but we acknowledge that the next couple ofquarters sh
4、ould continue to be challenging for the company.VNC deal a surprise;New iron ore taxation impact cash costVale announced that it is finalizing a deal with Sumic Nickel Netherlands(which owns 21%of VNC)to postpone the put option Sumic has on the VNCproject from 2012 to 2015.In addition,Vale said that
5、 it will increase itsownership of VNC from 74%to 80.5%next quarter.Another key highlight ofthe 3Q12 results was that Vale started provisioning expenses for the new statemining taxes,which negatively impacted iron ore cash cost by USD1.85/t inthe quarter.Net/Net:More positive than negative surprisesO
6、verall Vale was able to show good results in an unfavorable economic,Rodrigo BarrosResearch Analyst(+55)11 2113-Leandro CappaResearch Analyst(+55)11 2113-Jorge Beristain,CFAResearch Analyst(+1)203 863-Price/price relative,environment and we were positively surprised on the companys ability to,10/10,
7、4/11,10/11,4/12,sustain a high pellet premium,quickly shift iron ore volumes from Europe to,China and reduce iron ore costs despite an increase in taxation.The main,BOVESPA(Rebased),negative news of the quarter was the increase in mining taxes,which willnegatively impact iron ore cash costs by cUSD2
8、/t going forward.Valuation and Risks,Performance(%)AbsoluteBOVESPA,1m-6.3-7.7,3m-0.68.6,12m-29.00.5,Our target price is calculated using a DCF methodology(9.40%WACC,11.50%Ke,1.3 company beta,5%market risk premium,5%risk free rate,30%debt inthe capital structure,6%pretax Kd and 2.5%terminal growth(ba
9、sed on ourknowledge of the asset base and expectations of long-term growth).Downsiderisks include lower-than-expected realized iron ore prices;lower economic andFAI growth in China;sustainability of industrial production recovery indeveloped countries;projects execution;sharp revaluation of the Braz
10、ilian realand Canadian dollar and prospective M&A activity.Forecasts And Ratios,Year End Dec 31EBITDA(USDm)EBITDA margin(%)EPS(USD)EV/EBITDA(x)DPS(USD)Dividend yield(%),2010A24,95555.13.266.90.571.9,2011A32,72155.54.435.11.745.9,2012E17,36239.42.096.51.176.7,2013E19,45641.02.096.40.663.8,2014E24,178
11、42.52.505.20.663.8,Source:Deutsche Bank estimates,company data_Deutsche Bank Securities Inc.All prices are those current at the end of the previous trading session unless otherwise indicated.Prices are sourcedfrom local exchanges via Reuters,Bloomberg and other vendors.Data is sourced from Deutsche
12、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 that could affect the objectivity of this report.Investors should consider this report as only a single fa
13、ctor in making their investment decision.DISCLOSURES ANDANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072/04/2012.,24,20,30,25 October 2012Metals&MiningVale,Model updated:02 October 2012,Fiscal year end 31-Dec,2009,2010,2011,2012E,2013E,2014E,Running the numbers,Financial Summary,Latin Ame
14、ricaBrazilMetals&MiningVale,DB EPS(USD)Reported EPS(USD)DPS(USD)BVPS(USD)Valuation MetricsPrice/Sales(x),1.011.010.5210.794.5,3.263.260.5713.013.5,4.434.431.7415.042.6,2.092.091.1715.872.0,2.092.090.6617.261.9,2.502.500.6619.101.6,Reuters:VALE.NBuyPrice(24 Oct 12)Target Price52 Week rangeMarket Cap(
15、m),Bloomberg:VALE UNUSD 17.44USD 24.00USD 15.88-26.62EURm 69,112,P/E(DB)(x)P/E(Reported)(x)P/BV(x)FCF yield(%)Dividend yield(%)EV/SalesEV/EBITDAEV/EBIT,19.519.52.7nm2.64.913.119.0,9.19.12.7nm1.93.86.97.9,6.76.71.47.55.92.85.15.8,8.38.31.1nm6.72.66.58.6,8.38.31.0nm3.82.66.48.6,7.07.00.93.73.82.25.26.
16、8,USDm 89,630,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%logistics holdin
17、g.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 BrazilPrice
18、 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,23,3118,7796,0577,5565,3496,811-10,
19、048-3,2370-2,7552,181-2,423-6,234132,45,29324,95521,69521,30117,26417,006-18,899-1,8930-3,000-4422,138-3,197-4,244,58,99032,72128,59927,93422,88527,448-16,07511,3730-9,000-2,882-3,956-4,4659,44,03817,36213,04911,22010,75018,992-19,014-220-6,0006,754-4,326-3,5952,174,47,40419,45614,42913,70410,77515,
20、697-22,255-6,5580-3,4007,7541,513-691-963,56,87824,17818,47516,46212,89518,920-15,5523,3680-3,400-1,3301,690328-1,847,Balance Sheet(USDm),16,Cash and cash equivalents,11,040,9,377,3,531,1,838,1,148,1,476,12Oct 10,Apr 11,Oct 11,Apr 12,Property,plant&equipmentGoodwill,67,6372,313,83,0963,317,88,8953,0
21、26,100,7542,948,117,9822,948,127,8302,948,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
22、,11419,502,31,074136,61431,43521,54652,98183,63329,597,33,594155,67142,43522,09564,53091,14241,287,37,592169,84645,93523,11969,054100,79244,459,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,-25.3-52.8,7.60.0,20.019.7,EBITDA MarginGrowth&Pro
23、fitability150100500-50,EBIT Margin,35302520151050,Payout ratio(%)EBITDA Margin(%)EBIT Margin(%)ROE(%)Net debt/equity(%)Net interest cover(x)DuPont AnalysisEBIT margin(%),51.537.726.010.819.6nm26.0,17.455.147.927.420.815.747.9,39.355.548.531.224.38.648.5,55.839.429.613.535.43.829.6,31.641.030.412.645
24、.34.430.4,26.442.532.513.844.13.832.5,09,10,11,12E,13E,14E,x Asset turnover(x),0.3,0.4,0.5,0.3,0.3,0.3,x Financial cost ratio(x),1.2,0.9,0.9,0.7,0.8,0.7,Solvency5040302010,Sales growth(LHS),ROE(RHS),2015105,x Tax and other effects(x)=ROA(post tax)(%)x Financial leverage(x)=ROE(%)annual growth(%)x NT
25、A/share(avg)(x)=Reported EPSannual growth(%),0.85.91.810.8-69.29.41.01-61.6,0.814.91.827.4155.211.93.26221.5,0.917.71.831.213.814.24.4335.9,1.18.11.713.5-56.815.52.09-52.8,1.07.41.712.6-6.416.52.090.0,0.97.91.713.88.918.22.5019.7,0,0,Source:Company data,Deutsche Bank estimates,09,10,11,12E,13E,14E,N
26、et debt/equity(LHS)Rodrigo Barros+55 11 2113-5964Page 2,Net interest cover(RHS),Deutsche Bank Securities Inc.,25 October 2012Metals&MiningValeTable of ExhibitsFigure 1:Results highlights.5Figure 2:Volumes per segment.6Figure 3:Average realized prices.6Figure 4:Revenues breakdown.6Figure 5:Operationa
27、l summary.7Figure 6:Cost breakdown.7Figure 7:Adjusted EBITDA generation by segment*.8Figure 8:Adjusted EBITDA change by segment.8Figure 9:Iron ore and pellets shipments by destination.9Figure 10:Iron ore and pellets shipments by destination China vs.RoW.9Figure 11:Vale contingencies.10Figure 12:Cape
28、x by business area.10Figure 13:Iron ore mining and logistics(part 1).11Figure 14:Iron ore mining and logistics(part 2).12Figure 15:Pellet plants.12Figure 16:Copper mining.13Figure 17:Nickel mining and refining.13Figure 18:Potash mining and logistics.13Figure 19:Energy.14Figure 20:Steelmaking.14Figur
29、e 21:Vale production.15,Deutsche Bank Securities Inc.,Page 3,25 October 2012Metals VNC deal a surpriseVale reported yesterday 3Q12 results above expectations:Recurring adjusted EBITDA ofUSD4.3bn was 18%above our forecast and recurring EPADR of USD0.39 was in linewith our estimates.The only non recur
30、ring item which we excluded from thesecalculations was a USD542mn increase in provisions associated with CFEM taxes.Vale made several important announcements in the quarter,most of them positive forVales outlook.We reiterate our Buy recommendation on the stock due to the existingupside to our DCF de
31、rived target price,but we believe that the stock is likely to performbetter after 2Q13 only,when we expect the growth outlook for China to become morepositive.Key announcements and highlights of the quarter were:VNC deal:Vale agreed to increase its stake in VNC from 74%to 80.5%nextquarter,while its
32、partner in the project Sumic Nickel Netherlands agreed todelay until 2015 the possibility to exercise its put option to sell its participationto Vale.Oman deal:Vale sold a 30%stake in its pelletizing operations in Oman,whichcosted USD1.4bn to built,to Oman Oil Company,a company wholly owned bythe Su
33、ltanate.The stake was sold for USD71mn.VLOC deal:As previously announced,Vale sold 10 large ore carriers to PolarisShipping Co.for USD600mn.Vale entered into long term freight agreementswith Polaris to continue using such ships.New mining tax:Vale provisioned USD145mn in the quarter for the new mini
34、ngstate taxes implemented by Minas Gerais and Para states.This was the mainnegative news from the quarter and as a consequence of this,Vales iron orecash cost is likely to increase by cUSD2/t going forward.Pre-operational expenses:Pre-operating expenses and inventory adjustments inthe quarter were U
35、SD364mn,12%higher than in the 2Q12.Since 2011 Valehas already committed USD1.1bn in pre-operating expenses to VNC andUSD436mn to Ona Puma nickel projects.Positive iron ore prices:Vale surprised positively on iron ore prices.While in thecase of non agglomerated iron ore the realized price of USD84/t
36、was 2%aboveforecast,in the case of pellets the realized price of USD141/t was 21%higherthan we estimated.The key reason for this seems to be that pellet buyerscontinued to follow the VRM pricing methodology,which uses the previousquarter average iron ore price rather than monthly/spot prices.Impairm
37、ent test on Ona Puma:Vale is finalizing the assessment of costs toreform the furnaces of Ona Puma.The company said that it will announce theresults of the impairment test of this project as soon as it is concluded.,Page 4,Deutsche Bank Securities Inc.,25 October 2012Metals&MiningValeFigure 1:Results
38、 highlights,(USDm)Iron ore total(000t)Iron ore(000t)Pellets(000t)RevenuesCOGSEBITDAEBITDA marginExpensesNon-recurring items(operating-incl.in expenses)Adjusted EBITDAAdjusted EBITDA marginAdjusted Recurring EBITDA*Adjusted Recurring EBITDA margin*Operating profitOperating marginOperating profit(adju
39、sted)Net financial gain(exp)Pre-tax profitIncome taxEffective tax rateEquity income(loss)Minority interestNet majority incomeNon-recurring items(operating+financial)Net majority income adjusted for non-recurringEPADR(USD)Recurring EPADR(USD)Net debt(cash)Iron ore volume(m mtons)Avg iron ore price(US
40、D/mton-incl.pellets)Cash cost(USD/mton)Nickel volume(000 mtons)Nickel price(USD/lb),3Q12A78,17166,20511,96610,7256,1283,71334.6%1,9505423,73834.9%4,28039.9%2,64724.7%2,647-8341,81338021%154-821,669-3582,0270.320.3920,98078.292.538.555.07.5,3Q12E81,13569,96011,17510,1825,9513,52734.6%1,7603,63935.7%3
41、,63935.7%2,47124.3%2,471-5131,95848925%572252,0152,0150.390.3923,18981.186.543.748.07.6,vs.est-4%-5%7%5%3%5%-2bp11%nm3%-88bp18%417bp7%41bp7%63%-7%-22%nm-73%nm-17%nm1%-17%1%-10%-4%7%-12%15%-2%,2Q12A75,25562,97812,27711,8936,0155,00742.1%1,9553775,11943.0%5,49646.2%3,92333.0%3,923-2,5481,375-1,060-77%
42、158-692,662-5333,1950.520.6220,85275.3112.439.863.08.1,QoQ4%5%-3%-10%2%-26%-748bp0%nm-27%-819bp-22%-631bp-33%-831bp-33%nm32%-136%nm-3%19%-37%nm-37%-37%-37%1%4%-18%-3%-13%-7%,3Q11A77,45367,00810,44516,3616,2519,39157.4%1,73709,63158.9%9,63158.9%8,37351.2%8,373-3,3934,9803517%282-244,93504,9350.960.96
43、15,33777.5158.742.568.09.6,YoY1%-1%15%-34%-2%-60%-2,278bp12%nm-61%-2,401bp-56%-1,896bp-68%-2,650bp-68%nm-64%8%nm-45%242%-66%nm-59%-66%-59%37%1%-42%-9%-19%-22%,Source:Deutsche Bank and company data*Adjusted by dividends received Adjusted by the USD542mn CFEM provision in the 3Q12Detailed analysis of
44、Vales results:Volumes:Iron ore volumes of 66 mt were 5%below our projection,which waspartially offset by pellet shipments of 12mt(+7%vs.estimates).China wasresponsible for 49%of Vales iron ore shipments(vs.44%in the 2Q12),followed by Europe(17.9%share),Japan(10.9%)and Brazil(10.3%).Nickelshipments o
45、f 55kton were 15%above estimates,while copper volume was84kton(+27%).Coal sales of 1.4mt were 21%below estimates.,Deutsche Bank Securities Inc.,Page 5,25 October 2012Metals&MiningValeFigure 2:Volumes per segment,(000t)Ferrous materialsIron orePelletsManganese oreFerroalloysCoal,3Q12A78,64866,20511,9
46、66446311,377,3Q12E81,88169,96011,1756291171,733,vs.est-4%-5%7%-29%-74%-21%,2Q12A75,86462,97812,277510992,259,QoQ4%5%-3%-13%-69%-39%,3Q11A77,91067,00810,4453561011,832,YoY1%-1%15%25%-69%-25%,Base metals,NickelCopperPGMs&Precious metals(oz)Cobalt(tonnes)Railroads(million ntk),55845574328,036,486648040
47、86,717,15%27%16%6%20%,63615755705,787,-13%38%-3%-24%39%,68807987036,657,-19%5%-30%-39%21%,Source:Deutsche Bank and company dataPrices:Average realized iron ore price of USD84/t(FOB Brazil)was 2%aboveour forecasts(and 19%below 2Q12 figures),while pellet price of USD141/texceeded our projection by 21%
48、.Realized prices for nickel(USD7.49/lb),copper(USD3.51/lb)and coal(USD163/t)were-2%,+5%and+25%respectively,compared to our forecasts.Figure 3:Average realized prices,(USD/t),3Q12A,3Q12E,vs.est,2Q12A,QoQ,3Q11A,YoY,Ferrous materials,Iron orePelletsManganese oreFerroalloysCoal,841411281,774163,82117120
49、1,303131,2%21%6%36%25%,1031591241,303122,-19%-11%3%36%34%,1512071291,376156,-45%-32%-1%29%5%,Base metals,Nickel(USD/lb)Copper(USD/lb)Cobalt(US$/lb),7.493.5111.55,7.623.3512.73,-2%5%-9%,8.063.4112.73,-7%3%-9%,9.593.6618.71,-22%-4%-38%,Source:Deutsche Bank and company dataNet Revenues:Vale reported Ne
50、t Revenues of USD10.7bn in the quarter,5%above our estimates.The key reason for the higher than expected revenueswas base metals volumes above expectations.Base Metals revenues were 21%above forecasts.Figure 4:Revenues breakdown,(US$m)Bulk materialsFerrous mineralsCoalBase metalsLogistics servicesOt
