Macquarie upgrades Alumina to Outperform

Published at Feb 7, 2017, in Features

Macquarie has upgraded Alumina’s (ASX: AWC) recommendation from neutral to outperform and increased its price target by 35% to $2.30, implying upside of 20% to the company’s current trading range.

Through its ownership of 40% of each of the Alcoa World Alumina and Chemicals (AWAC) entities which form a part of the Alcoa alumina business segment, Alumina is strongly leveraged to movements in the aluminium price.

In response to recent disclosures from Alcoa, Macquarie has made material upgrades to its aluminium price outlook and undertaken a remodelling of its earnings estimates for the group, including the potential for growing bauxite export revenues.

These revisions have resulted in the broker increasing earnings forecasts for calendar years 2017 and 2018 by circa 16%.

Commenting on broader industry conditions, Macquarie said, “We expect buoyant alumina prices to persist for the remainder of this year and potential production curtailments in China next winter present an emerging upside risk to our base case forecasts for alumina prices beyond 2017”.

It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

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