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(Sharecast News) - Analysts at Berenberg hiked its target price on mining giant Anglo American from 4,000p to 4,200p on Friday as it said the market was overlooking the consensus upside from its planned merger with Teck.
Berenberg said it continues to believe investors were underestimating the underlying earnings potential of the combined Anglo-Teck business, with Chinese competition approvals now the final major hurdle before completion - which was expected to close between September 2026 and March 2027.
Once merged and following the disposal of noncore assets, Berenberg said the new entity, to be known as Anglo Teck, will be dominated by copper, which was expected to account for roughly 74% of EBITDA. Iron ore and zinc will contribute roughly 15% and 8%, respectively, with the remainder coming from manganese.
Berenberg said the enlarged group would be a roughly 1.3mtpa copper producer, a profile it believes could command a premium multiple in the UK market.
The German bank argued that consensus forecasts did not yet reflect the economics of the combined business, stating a review of Visible Alpha estimates for both companies suggested the sellside was largely modelling them separately, whereas Berenberg's integrated model put its 2027-29 EBITDA forecasts approximately 6% ahead of consensus. Using consensus commodity prices, the broker said it would be 12% ahead on EBITDA over the same period.
Berenberg, which reiterated its 'buy' rating on the stock, added that once the deal completes and Anglo Teck holds a capital markets day, the market will likely recognise the embedded upside. .
"We make no changes to our model. We lift our price target to 4,200p per share (from 4,000p per share) as we roll forward our EBITDA and apply a 1.4x NAV multiple (from 1x) to reflect the premium NAV valuations seen in the sector currently. The shares are trading on 1.91x NAV and 7.6x 2027E EBITDA (based on a merged business), which we think is too cheap given premium peer valuations, and think that the shares can comfortably trade at 9-10x EBITDA," said Berenberg.
Reporting by Iain Gilbert at Sharecast.com
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