Goldman Sachs cuts ENRC price target after interim results

2011-08-24 10:31:00

Analysts at Goldman Sachs have reduced their guidance and target price for Eurasian Natural Resources (LON:ENRC) on the back of the Kazakh miner's interim results.Last week’s results report from ENRC showed strong growth in earnings and revenues, but it still fell short of Goldman Sachs’ projections.ENRC’s earnings before interest, tax depreciation and amortisation (EBITDA) jumped 33 percent year on year to US$1.92 billion and revenues climbed 32 percent to over US$4 billion.Earnings per share increased 30 percent, to US 91 cents and there is a dividend per share of US 16 cents.Goldman analysts led by Yulia Chekunaeva said the figures were slightly behind their estimates and consensus forecasts, owing to cost inflation.As a result, Chenukaeva cut her revenue estimates for ENRC for 2011-2013 by 2 to 3 percent and earnings per share projections by around 7 percent on rising charges and tax rates.The 12 month price target was reduced from 1,100 pence to 1,060 pence, which, however, still represents a massive premium of over 70 percent to the stock’s Tuesday’s close of 612 pence.Accordingly, the “buy” recommendation was upheld with Chenukaeva noting that according to Goldman’s commodity analysts have not reduced their price forecasts, believing that demand will be supported by global GDP growth and “supply-side disappointments”.Goldman’s base case scenario is for the Federal Reserve to unleash the third round of quantitative easing (QE3) later this year or in early 2012, which should provide more support to commodities.Apart from exposure to strong commodity prices, Goldman based its “buy” rating for ENRC with its strong balance sheet, low cash costs and flexible growth expenditure programme.ENRC’s share price has been depressed by the turmoil at its latest annual meeting in June, which saw two directors voted off the group’s board. One of them advised shareholders to sell shares the first chance they get.ENRC is expected to complete its corporate governance review next month.