Morgan Stanley upgrades Teck Resources, Alcoa and Nexa as value begins to emerge

Morgan Stanley upgrades Teck Resources, Alcoa and Nexa as value begins to emerge

Written by Sam Bogda

An analyst at Morgan Stanley upgraded shares of mining company Teck Resources (NYSE:), Alcoa (NYSE :), and Nexa Resources (NYSE: to Overweight In a Thursday note, the value is starting to show.

However, despite strong balance sheets and cheap valuations, they are only selectively upgrading companies’ mining stocks as they see “deep value and/or self-help stories amid ongoing uncertainty over the macro/China recovery.”

The analyst said Tech is the company’s top pick.

β€œWe are selectively turning more positive with respect to mining stocks as most stocks in our coverage are trading at increasingly attractive stock valuations – the relative valuation of global metals and mining stocks stands at 1.4 standard deviations below the historical average – despite strong FCF generation capital discipline, and low leverage,” the analyst wrote.

Teck price target raised to $51 from $41, Alcoa price target raised to $66 from $51, Nexa price target lowered to $6.6 from $7.2.

β€œOverall uncertainties persist as global growth continues to slow, driven by DM and EM outside China. However, our China economy team expects a modest recovery to 5.2% in 2023, up from a below-consensus 2.8% GDP growth rate this year, Like Beijing. It gradually eases the severity of housing and the Covid crisis.” β€œRecovery is highly dependent on policy, but the team believes that Beijing will likely intensify policy support for the housing sector, providing additional financing and a better coordinated intervention to ensure that construction of contracted homes is completed. The team expects a gradual exit from Covid-zero next spring. The stimulus that is considered China’s real estate and infrastructure targets particularly favorably for the M&M sector, where the country accounts for 50% or more of global demand for most minerals.

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