Marketing and M&A at the Core, with Copper and Coal Price Leverage

Research evidence excerpt

Marketing and M&A at the Core, with Copper and Coal Price Leverage

geopolitical environment.

The Rationale of Transformative M&A: We see three clear potential benefits to Glencore of doing We have increased our normalized annual

large M&A. First is operational synergies in some cases. Corporate cost reductions can be material Marketing EBIT estimate from $2.9bn to

as well. Second, large M&A can lead to a step-change increase in Marketing EBIT as this provides $3.2bn for Glencore. At 10x EBIT, this

additional own-sourced material to feed into Glencore's Marketing machine. Third, greater size implies a $3bn increase to our estimate

leading to better access to capital implies a lower cost of capital, which should also justify a of fair value for Glencore, which equates

higher valuation. We expect large-scale M&A to be an ongoing factor in the sector as other industry to ~20p per share. We have increased

executives - and many investors and analysts, including us - share Glencore's view regarding the our price target from 700p to 720p and

benefits of scale. reiterate our Buy rating on GLEN. On our

current estimates, Glencore trades at a

Supportive Fundamentals: Our analysis (HERE) indicates that there are structural factors that will

2027E P/E of 11.6x and EV/EBITDA of 5.6x.

lead to demand growth in excess of global GDP growth for "electrification" commodities such as

At our 720p target, Glencore would be on

copper, aluminum, lithium, nickel and cobalt. In the case of copper, the combination of accelerating

a reasonable P/E of 15.9x and EV/EBITDA

demand and ongoing supply constraints will likely lead to significantly higher prices. Supply growth

of 7.1x.

for other industrial commodities will be less constrained, in our view, so price upside for those