Glencore PLC (LSE:GLEN) shares offer future growth and the prospect of improved ESG standards, despite a weak start to the year driven by warm weather and coal falling out of favour in Europe, said Credit Suisse.
The FTSE 100 commodities trading and mining giant has "significant copper exposure” that provides an opportunity for long term growth, analysts at the investment bank said, while it could be a potential “ESG improver in the medium term”.
An ‘outperform’ rating was maintained for the shares with the analysts taking a “constructive view” on thermal coal, which is underpinned by tight energy markets.
Giving Glencore a target price of 700p, up from 512p currently, analysts said in a note that the shares offered an “attractive valuation” and shareholder returns.
Despite warmer weather in Europe, the continent is still vulnerable to supply shocks, they cautioned, with storage capacity being “low relative to consumption” across the board.
“Europe is building regasification capacity which should support demand,” the analysts said, adding that Glencore’s earnings and free cash flow are “a powerful driver for the investment case”.
Oil and coal prices should continue to climb in 2023, analysts at UBS said earlier this week, with Glencore likely to be a beneficiary.
UBS suggested coal prices would “stay elevated for longer” due to supply issues, likely finishing the year at around US$300 per tonne.
In December, JP Morgan dubbed Glencore as their top pick for 2023 among Europe's mining sector.