Broker snap: Fresnillo upgraded after falling to target price, says Citi

25th Jun 2013 09:30

Hefty falls in the share price of precious metals miner Fresnillo since the start of the year triggered a ratings upgrade by Citigroup from 'sell' to 'neutral' on Tuesday morning.As of Monday's closing price of 887.5p, the stock had fallen by around 52% since the start of 2013, which Citi believes was based on its previous apparent over-valuation ("helped by a limited free float") as well as the "exit of the type of portfolio investor who simply used it as a proxy-exposure to the silver price, irrespective of valuation"."Following its sharp fall, Fresnillo has reached our target price [1,016p] and hence we are upgrading the group to 'neutral' from 'sell'. Our earnings per share and net present value (NPV) remain unchanged as does our valuation metric of 1.4x price-to-NPV. Our upgrade is entirely in response to the sharp price fall."The broker said that Fresnillo is the 'best-in-class' UK-listed precious metals miner with top quality mines and very good production growth in prospect. Fresillo is its preferred exposure to a rally or uptrend in metals prices."Our only concern with FRES in the past has been the very high-looking valuation level attached to the group by the market."The stock was up 1.8% at 903.5p by 09:34.