NYRSTAR: Solid performance, outlook slightly trimmed

1H11 normalised EBITDA was up 8% HoH to €123m, in line with expectations, amid a 2% HoH increase in the zinc price in € terms. 1H11 smelting EBITDA was better than expected (€117m vs consensus f/c €100m), due to record zinc metal production (561kt), strong by-products contributions and unlocking untapped value initiatives (€29m). 1H11 normalised mining EBITDA fell short of expectations (€26m vs consensus f/c €43m), impacted by several one-off production issues during the ramp-up issues. Hence, 1H11 zinc in concentrate production grew by 58% HoH to 79kt, below INGF (90kt). The average C1 cash cost continued to improve in line with expectations, down 19% HoH to US$1,515/t. Bottom line, 1H11 normalised (reported) EPS amounted to €0.25 (€0.15).

Assuming a flattish US$2,400/t zinc price and 1.43 €/US$ exchange rate, we expect a 2H11 smelting EBITDA not too far below the 1H level at €109m, in spite of slightly more cautious production estimates (549kt), as the company guided for another c.€29m contribution from unlocking untapped value. We expect 2H11 mining EBITDA up 315% HoH to €109m, based on a 2H11 zinc in concentrate mining production of 144kt, including a 29kt (four months) contribution from Breakwater and average C1 cash cost down to c.US$1,200/t. Note that our FY11F zinc in concentrate assumption excl. Breakwater of 194kt is c.10% below company guidance of 215kt, and reduces the risk to our estimates from further ramp-up issues. At group level, we cut our 2011F and 2012F normalised EBITDA by 5% and 2% to €329m and €526m, respectively. At the EPS level, our cuts are more outspoken due to higher depreciation and financial cost estimates: we cut our 2011F and 2012F EPS by 20% and 7% to €0.80 and €1.75, respectively. Hence, we continue to model in a strong 2012F earnings momentum (EPS growth of 120%) driven by the upstream integration strategy delivery. Our 2012F EBITDA and EPS estimates seem 1% and 7%, respectively, above Bloomberg consensus (last 28 days).

At 2012F PER of 5.0x and 2012F EV/EBITDA of 3.7x, valuation seems at the low end of the peer group and remains attractive, in our view. We continue to BUY Nyrstar with a €12.0 TP, targeting 2012F EV/EBITDA of 5.0x. Key risks are larger-than-anticipated further mine ramp-up issues, issues with closing the Breakwater deal, declining zinc prices/sales volumes and a weakening USD.

Price: €8.55. Last published: target price: €12.0; recommendation: BUY

09:13 Écrit par swingteam-cc | Lien permanent | Commentaires (0) |  Facebook |

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