While 2019 has been affected by lower demand and de-stocking, Morgan Stanley remains bullish on near-term copper prices. Inventory levels are low and supply growth is weak. Moreover, there are positive indicators of demand in China, which should support the copper price.
The broker forecasts a price of US$3.00/lb in 2020. The preferred copper play is Sandfire Resources, which has a copper revenue exposure at around 90% of FY20 revenue.
The current 3-year mine life increases leverage to a near-term rise in the copper price and there are upcoming catalysts such as the Black Butte feasibility study, due in the December quarter.
Overweight rating and $7.65 target. Industry view is Attractive.
Target price is $7.65.Current Price is $6.29. Difference: $1.36 – (brackets indicate current price is over target). If SFR meets the Morgan Stanley target it will return approximately 18% (excluding dividends, fees and charges – negative figures indicate an expected loss).