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On Friday, Berenberg analysts upgraded Fresnillo Plc. (LON:FRES:LN) (OTC: FNLPF (OTC:FNLPF)) stock from Hold to Buy, setting a new price target of £10.20, up from the previous £8.40. The upgrade follows the company’s FY 2024 results, released on March 4, which highlighted an improvement in financial performance, driven by strong precious metal prices, operational stability, and enhanced cost control measures. The company’s strong performance is reflected in its impressive 74.5% return over the past year and robust revenue growth of 29.3%. InvestingPro analysis indicates the company is currently trading near its 52-week high of $10.99, with strong financial health metrics.
Berenberg’s analysts pointed to the recent financial results as a key factor for the upgrade, noting that Fresnillo’s financials have been bolstered by robust silver and gold prices. The company’s commitment to maintaining operational stability and implementing more effective cost control strategies was also cited as a reason for the improved outlook on the stock. According to InvestingPro data, Fresnillo maintains a strong balance sheet with more cash than debt and a healthy current ratio of 6.63, demonstrating excellent liquidity. For investors seeking deeper insights, InvestingPro offers 12 additional valuable tips about Fresnillo’s financial position and market performance.
The analysts further mentioned the announcement of a special dividend by Fresnillo, reflecting the company’s strong balance sheet. They suggested that there is potential for additional special dividends if silver and gold prices continue to remain high. This possibility, along with the company’s financial performance, could lead to a re-rating of the stock’s multiple, according to Berenberg.
Fresnillo’s commitment to shareholder returns was underscored in Berenberg’s analysis, with the firm expressing confidence in the company’s visibility on returning value to its shareholders. The analysts believe that the combination of Fresnillo’s financial results, the special dividend, and the prospect of further one-off dividends in the event of sustained high precious metal prices supports a more optimistic valuation of the company.
In summary, Berenberg’s upgrade to a Buy rating for Fresnillo stock, along with an increased price target of £10.20, reflects the firm’s positive view on the company’s financial health, capacity for shareholder returns, and the potential for a re-rating driven by strong market conditions for precious metals.
In other recent news, JPMorgan has maintained an Overweight rating on Fresnillo, setting a price target of GBP10.00. The decision is supported by the company’s substantial dividend payout, which stands at approximately 200%, translating to an 8% yield for the fiscal year 2024. JPMorgan’s analysis suggests that Fresnillo is addressing previous cost challenges, with adjusted production costs expected to decrease slightly in 2025. This improvement is attributed to easing inflation in Mexico and a depreciation of the Mexican Peso, which has weakened by 18% year-over-year. Fresnillo has reiterated its gold and silver production volume guidance for 2025-2027, aligning with JPMorgan’s estimates. The firm also forecasts potential EBITDA upgrades of 6% and 16% for 2025 and 2026, respectively, based on current commodity prices. Despite the special dividend, Fresnillo is projected to achieve a net cash position by the end of 2025, equating to about 8% of its market capitalization. Additionally, a free cash flow yield of around 12% is expected for 2025, with a base dividend yield anticipated at 6%. JPMorgan’s revised EBITDA forecasts for 2025 and 2026 show a 3% increase for 2025 and a 1% decrease for 2026, placing their projections below and above the Bloomberg consensus by 5% and 14%, respectively.
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