Investing.com — Shares of Boliden (ST:) rose over 3% on Tuesday following an upgrade to a ‘neutral’ rating by analysts at UBS Global Research.
The stock’s boost came after the analysts reassessed the company’s outlook, particularly in light of its recent deal of Neves Corvo and Zinkgruvan from Lundin.
UBS sees the move as strategically sound and valuation more favorable than initially anticipated.
The deal, which is expected to close by mid-2025, is seen as accretive to earnings and could provide valuable synergies with Boliden’s existing operations.
Despite the positive impact of the deal, UBS analysts noted that Boliden faces several challenges, including lower mined grades and a tough outlook for smelting due to historically low and zinc treatment charges.
While the company’s smelting business remains well-positioned compared to peers, overcapacity in the smelting sector and insufficient investment in new mining projects are expected to limit any significant earnings growth.
Analysts also pointed out that the 2025 smelting earnings could be weaker than expected, though consensus earnings have started to reflect this.
Boliden’s mining division has also struggled with declining production, largely due to lower grades at key sites such as Aitik and Kevitsa.
Although analysts had anticipated a bottoming out of this trend in 2023 and 2024, recent grade guidance suggests a further decline at Aitik and uncertainty surrounding the mine plan at Kevitsa.
However, UBS believes that after several years of underperformance, the market may begin to factor in an eventual recovery, albeit not in the immediate future.
UBS also flagged the company’s capital expenditure, which peaked in 2023 and 2024 with major projects such as the Odda expansion and the Aitik tailings storage facility.
Although there are risks of further cost overruns, analysts believe that peak capex is now behind the company, with spending expected to decline in 2025.
In terms of valuation, UBS raised its price target for Boliden to SEK310 per share, based on an updated earnings outlook that includes the Neves Corvo and Zinkgruvan acquisition.
Despite the challenges, UBS sees the risk-reward profile for Boliden as more balanced now, given the lower likelihood of further negative surprises.
