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On Wednesday, JPMorgan analyst Patrick Jones reaffirmed an Overweight rating and a GBP10.00 price target on Fresnillo Plc (LON:FRES:LN) (OTC: FNLPF (OTC:FNLPF)), citing the company’s substantial dividend payout and positive outlook. Jones highlighted the impressive ~200% dividend payout from the mining company, which translates to an approximately 8% yield for the fiscal year 2024. According to InvestingPro data, the company has maintained dividend payments for 17 consecutive years, with a historical 5-year average yield of 2%. The stock has delivered an impressive 51.4% return over the past year, significantly outperforming broader market indices.
Jones noted that management indicated during the call that adjusted production costs for 2025 are expected to decrease by a low single-digit percentage. This marks the second consecutive year of declining costs, aligning with JPMorgan’s perspective that Fresnillo is overcoming previous cost challenges. Contributing factors to this improvement include easing inflation in Mexico and a depreciation in the Mexican Peso, which has weakened by 18% year-over-year, thereby reducing costs. The company’s operational efficiency is reflected in its healthy gross profit margin of 35.6% and strong liquidity position, with a current ratio of 6.63.
The company’s capital expenditure guidance for 2025-2027 aligns with JPMorgan’s estimates, and Fresnillo has reiterated its gold and silver production volume guidance for the same period. With the current uptrend in gold and silver prices and a projected weak Mexican Peso, JPMorgan anticipates potential EBITDA upgrades of 6% and 16% for 2025 and 2026, respectively, based on spot commodity prices.
Despite the special dividend, JPMorgan projects that Fresnillo will achieve a net cash position by the end of 2025, equivalent to approximately 8% of its market capitalization. The forecast also includes a free cash flow yield of around 12% for 2025. InvestingPro analysis indicates the company operates with a moderate debt level, with a total debt to capital ratio of just 0.11, and maintains strong financial health with an overall score of "GOOD." Get access to detailed financial analysis and 10 additional exclusive ProTips for Fresnillo with an InvestingPro subscription. With an expected base dividend yield of 6% (assuming a 50% payout), the firm estimates that Fresnillo could return more than 10% of its market capitalization to shareholders at the fiscal year 2025 results announcement in February 2026.
Incorporating the latest results and updated guidance, JPMorgan has adjusted its EBITDA forecasts for 2025 and 2026, with a 3% increase for 2025 and a 1% decrease for 2026. These revised estimates place JPMorgan’s projections at 5% below and 14% above the Bloomberg consensus for 2025 and 2026, respectively.
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