Nomura Securities Starts Century Aluminum (CENX) at Buy

Nomura Securities initiates coverage on Century Aluminum (NASDAQ: CENX) with a Buy rating and a price target of $28, saying multiple growth drivers in 2015-2015 offside downside risk to physical premiums.

Analyst Curt Woodworth commented, "We initiate coverage of Century Aluminum (CENX) with a Buy rating and $28 price target. We view Century as the best pure play on improvements we see taking place in the global aluminum market over the next several years, especially in the U.S., which is expected to be the tightest regional market owing to BiW lead growth. CENX has multiple growth drivers to create value above the commodity cycle, and its strong free cash flow outlook, even with conservative premia assumptions, underpins our views on valuation. However, we note that U.S. premiums continue to rise despite LME liquidation, owing to growing localized deficits and shift to off-warrant stock positions."

He added, "We see many drivers of CENX earnings growth in the coming years, including meaningful power cost improvement, increased output of value-added products (VAP), and the contribution from Mount Holly. At 4.4x 2016E EV/EBITDA, CENX is trading at a discount to its aluminum peers and its historical midcycle multiple, which we believe reflects concerns around downside risk to physical premia. Also we note that our 2016E estimates already factor in a significant (~20%) decline in premiums."

For an analyst ratings summary and ratings history on Century Aluminum click here. For more ratings news on Century Aluminum click here.

Shares of Century Aluminum closed at $23.85 yesterday.

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