Broker snap: Credit Suisse slaps "underperform" rating on Ferrexpo

29th Sep 2011 11:03

Credit Suisse has initiated coverage on the iron ore producer Ferrexpo with an "underperform" rating, saying it sees strong growth from the sector but pointing to the strong performance of Ferrexpo's share price lately.It has a 380p target price on the stock.It notes that Ferrexpo "is one of the few pure-play iron ore producers listed in Europe aiming to double volumes by 2016" but then addsthat it has outperformed most of its European steel and mining peers. "Should the growth outlook stabilise, we see better relative value elsewhere in the sector; and should the steel cycle turn down, iron ore and China would not be immune and we believe other companies will offer more defensive qualities," he said."We see some near-term downside risk to iron ore prices and we await a more attractive entry point."Credit Suisse expects margins to come under pressure at Ferrexpo at some point. While this may be later offset by volume growth, the upturn in production in 2014-16 could come too late for the iron ore "purple patch" Credit Suisse fears.---RG