Santander’s Top Picks in Brazil’s Metals and Mining: What You Need to Know

Santander’s latest report offers fresh insights into the Latin American metals and mining sector. New analysts have taken charge, keeping Vale (VALE3) as their top choice, favoring iron ore over steel.

Santander recommends an “outperform” rating (similar to a “buy”) for Vale, with a price target of $18 per ADR by the end of 2024.

They expect iron ore prices to stay high, forecasting $130 per ton by the end of 2024 and an average of $120 per ton for the year.

This outlook supports an estimated dividend yield of around 8%. Santander values Vale at 3.5 times Enterprise Value (EV)/EBITDA for 2024, 30% below its Australian peers.

CSN Mineração (CMIN3) also got an upgrade from neutral to buy, with a price target of R$7.50 by the end of 2024.

Higher iron ore prices and attractive dividend yields of about 10% contribute to this positive outlook. CSN Mineração is valued at 3.7 times EV/EBITDA for 2024, below its historical average.

For steel producers, Santander prefers Gerdau (GGBR4), recommending a buy with a price target of R$25.

Gerdau is expected to continue its strong performance, benefiting from low leverage and solid dividends.

Its shares trade at 3.3 times the expected EV/EBITDA for 2024, 35% below their historical average.

Santander has upgraded CBA (CBAV3) from neutral to outperform, with a price target of R$10.00 by the end of 2024.

Rapid deleveraging is anticipated, with net debt/EBITDA dropping from 7.9 times in Q1 2024 to 2.1 times in Q4 2024.

Analysts remain positive about aluminum prices staying high, seeing CBA trading at 5.3 times EV/EBITDA for 2024, 27% below its peers.

Pulp and Paper Insights

Santander reiterated a buy rating for Klabin (KLBN11) with a price target of R$31. The bank expects rising pulp prices and Klabin’s leadership in packaging to drive growth.

Klabin’s shares trade at an estimated 6.9 times EV/EBITDA for 2024, which Santander finds attractive. However, they caution that pulp prices might fall in the second half of 2024.

Suzano (SUZB3) also holds a buy rating with a price target of R$75. Suzano remains Santander’s top pick in this segment due to its strong balance sheet and growth initiatives.

The bank sees Suzano’s EBITDA potentially exceeding market consensus, reaching R$22.4 billion in 2024.

In a hypothetical merger between Suzano and International Paper (IP), Santander estimates the new company could trade at 6.8 times EV/EBITDA.

This valuation would place the new company’s share price at R$62 per share, compared to Suzano’s current R$49 per share.

These insights highlight Santander’s strategic picks in metals, mining, pulp, and paper, driven by expected commodity price trends and strong financial fundamentals.

In short, this information helps investors make informed decisions in these sectors.

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