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Vale SA ADR VALE

Morningstar Rating
$14.72 −0.08 (0.54%)
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Company Report

Vale Earnings: Solid Iron Ore Sales, the Main Driver of Earnings

We make no change to our fair value estimate for no-moat-rated Vale of USD 14.50 per share after its 2023 third-quarter result was modestly lower than our expectations. Adjusted EBITDA of USD 4.5 billion rose 12% on the same quarter of 2022, with higher iron ore prices and sales volumes more than offsetting increased unit cash costs and foreign-exchange headwinds. The company reiterated 2023 iron ore production and cost guidance but we modestly reduce our forecast iron ore sales by 3% to around 300 million metric tons, similar to 2022. With iron ore sales lagging production by 9% so far this year, we don’t think the gap will be fully made up in the fourth quarter despite sales more likely to track production in the quarter. We retain our forecast for unit cash costs to be at the top end of Vale’s unchanged guidance of between USD 21.50 to USD 22.50 per metric ton given inflation and likely soft volumes. Iron ore dominates Vale’s earnings, accounting for about 90% of our 2023 forecast EBITDA of USD 19.5 billion.

Price vs Fair Value

VALE is trading at a 2% premium.
Price
$14.72
Fair Value
$47.50
Uncertainty
High
1-Star Price
$88.74
5-Star Price
$2.70
Economic Moat
Kshb
Capital Allocation
Rjkk

Bulls Say, Bears Say

Bulls

Vale's lower unit costs relative to producers in India and China, as well as high-cost producers such as Anglo American, allow it to remain profitable even in depressed price environments.

Bears

We believe China's real estate- and infrastructure-driven economic growth has likely peaked and prices for materials such as iron ore will decline in future.

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News

Trading Information

Previous Close Price
$14.80
Day Range
$14.5914.79
52-Week Range
$12.2219.11
Bid/Ask
$14.73 / $14.95
Market Cap
$63.34 Bil
Volume/Avg
17.1 Mil / 21.8 Mil

Key Statistics

Price/Earnings (Normalized)
6.76
Price/Sales
1.60
Dividend Yield
8.60%
Dividend Yield (Forward)
8.60%
Total Yield
14.29%

Company Profile

Vale is a large global miner and the world’s largest producer of iron ore and pellets. In recent years the company has sold noncore assets such as its fertilizer, coal, and steel operations to concentrate on iron ore, nickel, and copper. Earnings are dominated by the bulk materials division, primarily iron ore and iron ore pellets. The base metals division is much smaller, consisting of nickel mines and smelters along with copper mines producing copper in concentrate. Vale has agreed to sell a minority 13% stake in its base metals business, which is expected to become effective early in 2024, and which is likely the first step in separating base metals and iron ore.
Sector
Basic Materials
Industry
Other Industrial Metals & Mining
Stock Style Box
Large Value
Total Number of Employees
64,516

Competitors

Valuation

Metric
VALE
BHP
RIO
Price/Earnings (Normalized)
6.7611.4413.32
Price/Book Value
1.673.592.61
Price/Sales
1.602.882.62
Price/Cash Flow
5.378.229.83
Price/Earnings
VALE
BHP
RIO

Financial Strength

Metric
VALE
BHP
RIO
Quick Ratio
0.640.921.37
Current Ratio
1.081.231.99
Interest Coverage
11.5910.716.36
Quick Ratio
VALE
BHP
RIO

Profitability

Metric
VALE
BHP
RIO
Return on Assets (Normalized)
14.43%14.16%10.47%
Return on Equity (Normalized)
34.31%31.17%20.35%
Return on Invested Capital (Normalized)
24.59%22.03%17.39%
Return on Assets
VALE
BHP
RIO

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