Broker tips: Antofagasta, Tate & Lyle, Jet2
By Iain Gilbert
Date: Wednesday 19 Feb 2025
(Sharecast News) - JPMorgan Cazenove double upgraded Antofagasta on Wednesday to 'overweight' from 'underweight' and hiked the price target to 2,400p from 1,600p citing a positive long-term copper outlook and leading medium-term copper growth.
The bank said its sector view since December 2024 has been that a return to US-China trade tensions could weigh on copper prices & EMEA miners before China stimulus later in the first quarter of 2024 could drive a V-shaped recovery.
JPM said its China economists expect the upcoming 5-8 March National People's Congress meeting could deliver fiscal stimulus, including consumer support, which it believes will be supportive for copper demand and mining equities.
JPM still forecast the copper market shifting to deficit in 2025, widening to a more than 3Mt deficit by 2030. The bank said that within EMEA mining, Antofagasta offers +15%/+30% copper growth to 2027/28E versus 2024, which is higher than peers.
JPM also said that following FY24 results, it has revised its 2025/26 group EBITDA forecasts by +2%/+2% and lifted its price target.
"Antofagasta trades on spot 9.8x/9.0x 2025/26E EV/EBITDA higher versus its EMEA base metal peers, but more in-line with its larger-scale global copper peers on circa 10x," JPM said. "Thus we double upgrade to OW."
Berenberg downgraded Tate & Lyle on Wednesday to 'hold' from 'buy' and slashed the price target to 600p from 900p as it said the shares were lacking a catalyst.
Tate said in a trading statement on 13 February that revenue for the year to the end of March was set to be mid-single digit percent lower and EBITDA growth was set to be towards the lower end of its guidance range of 4% to 7%. It pointed to continued geopolitical uncertainties and some pricing pressure.
"With no signs of a near-term improvement in pricing conditions or volume outlook for Tate & Lyle, we reduce our price target to 600.0p and downgrade our rating to hold," Berenberg said in a research note.
It said that following the trading statement, it now forecasts 3% price/mix declines for the Food & Beverage Solutions (FBS) division and the CP Kelco acquisition, with 5% volume growth in both businesses leading to 2% organic growth.
"We do not expect Tate to benefit from meaningful raw material deflation, which combined with negative pricing, points to margin contraction in FY 2026," it said. "However, we believe this will be more than offset by the contribution from cost savings associated with CP Kelco; we forecast an FY 2026 EBITDA margin of 21.4% (+70bp yoy)."
Berenberg said the new price target price implies a FY 2026 price-to-earnings multiple of 12.2x, "reflecting the limited near-term growth opportunities".
Analysts at Canaccord Genuity reiterated their 'buy' rating on package holidays business Jet2, noting that the group has been investing for a "high return future".
Canaccord Genuity held its FY25 pre-tax profits estimate at £563m, 3% below consensus, and said it still sees a lower pre-tax profit margin year-on-year.
The Canadian bank sees downside risk to consensus FY26 pre-tax profits, noting that any reactionary share price weakness would be a buying opportunity to increase a position in Jet2 shares, which continue to trade on a price-to-earnings ratio of more than 30% below pre-Covid levels.
Canaccord noted that FY26 will see start-up costs at Luton and Bournemouth, £45.0m of external-driven labour-related and SAF cost increases, and 3% year-on-year wage increases, offset by fuel hedging and a more efficient fleet.
"We see PBT outlook almost unchanged - with PBT margin lower YoY but profits still up (2% YoY). To us, PBT growth potential despite external pressures continues to demonstrate Jet2's strengths, stemming from the value of holidays - which are >80% of Jet2's revenues - backed up by a 'Fortress Balance Sheet'," said Canaccord, which stood by its 2,050.0p target price on the stock.
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