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Boliden (Buy, TP: SEK450.00) - Green growth in a brown industry We reiterate our BUY and have raised our target price to SEK450 (350) following a change of analyst. As well as megatrends underpinning demand for Boliden’s key metals, the company is set t

Boliden (BOL SS, Buy) - Green growth in a brown industry We reiterate our BUY and have raised our target price to SEK450 (350) following a change of analyst. As well as megatrends underpinning demand for Boliden’s key metals, the company is set to benefit from its access to cheap and fossil-fuel free electricity. We forecast impressive earnings growth and have identified notable hidden value, believing the market is overlooking the impact of the EUR700m Odda zinc smelter investment. Higher electricity prices = higher zinc prices. Because of structurally higher CO2 prices and a shortage of renewable energy, we see solid reasons for electricity prices to remain elevated. Zinc smelting is enormously energy-intensive, so this theme is also hugely important for the pricing of zinc (around a third of 2022E group EBIT). Positive dynamics of clean and cheap electricity overlooked. Boliden’s smelters have most of their annual electricity supply (3Twh) on multi-year contracts at competitive prices, many we believe below EUR50/Mwh. Due to a recently signed contract for Boliden’s Odda smelter (1.6Twh of electricity supply for 15 years), its favourable position is set to improve even further. Thus, high electricity prices long-term are likely to act as a major positive dynamic not reflected in our estimates (we use spot metal prices). Also, we have not baked in any financial effects from the zinc smelters being supplied with renewable energy emitting around 1Mt less CO2 than industry standards. Theoretically, this benefit is worth cSEK800m annually given the current CO2 pricing. 2021–2025e EBIT CAGR of 8%. Adjusting for SEK18 of cash total distribution (paid in Q2 2022e), the stock is trading at a 2022–2023e P/E of 9–10x (10-year average c12x). In light of better long-term mining volumes and incremental earnings from the Odda expansion, world-class sustainability, and an appealing price outlook for zinc, copper and nickel all underpinned by the electrification theme, we consider Boliden set for further revaluation. BUY reiterated and target price raised to SEK450, implying 30% upside potential from the current share price. Our target price is based on a 12% discount to our SOTP of SEK510 and a 2025e P/E of c11x, which includes SEK1.2bn of incremental EBIT from the EUR700m Odda expansion (>10% EBIT impact on 2021e). (31 pages)