On Tuesday, UBS analyst upgraded shares of Aurubis AG, a leading producer, from Sell to Neutral, adjusting the price target to €65.00 from the previous €71.00. The revision comes amid a challenging backdrop for the copper industry, with expectations of a recovery in copper prices in the medium term.
Aurubis AG, listed on the Frankfurt Stock Exchange under the ticker NDA:GR and also traded over-the-counter as AIAGF, has been navigating a market described as having a ‘meltdown’. Despite this, UBS maintains a constructive view on the future of copper prices.
The firm anticipates a rebound when refined copper output is pressured by concentrate shortages and low treatment and refining charges (TCRCs) in the third quarter of 2024 and fiscal year 2025.
The market for copper concentrate is expected to remain tight for an extended period, which could lead to sustained low TCRCs, with UBS estimating a 2024 TCRC benchmark of $40 per ton. This situation is believed to present a downside risk to the consensus for fiscal year 2025, but the market may have already accounted for this in current pricing.
Aurubis has experienced more than a 20% decrease in its share price since early May 2024. This decline has influenced UBS’s reassessment of the company’s risk versus reward profile, leading to a more balanced view. However, the firm also notes that recent management changes at Aurubis have introduced some uncertainty regarding the company’s capital expenditures and strategic direction.
While UBS prefers copper mining exposure over smelting for investors looking to capitalize on a potential recovery in copper prices, the current valuation of Aurubis following its recent share price drop has prompted the upgrade to a Neutral stance. The adjustment in Aurubis’ price target to €65 reflects this new assessment of the company’s prospects.
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