Elevated coal prices may make Glencore PLC (LSE:GLEN) one of the leading companies in the market for shareholder returns over the next two years, according to a note by Deutsche Bank AG (NYSE:DB).
The shares offer potential total return upside of 50% over the period, wrote the analysts, including Liam Fitzpatrick, in a note to investors. Deutsche Bank has a “buy” rating and a target price of 580p a share.
ESG and longer-term demand concerns mean that coal-exposed companies are valued on low multiples and high discount rates, meaning that changes to near-term cash flows will have a “significant impact on valuations,” Deutsche Bank said.
Glencore shares have advanced 30% this year, compared with a drop of 0.4% for the FTSE 100.