Fresnillo PLC

Fresnillo PLC is an FTSE-100 index listed one of the world’s leading silver producer and Mexico’s largest gold producer.

The Company will release Q3 FY22 production report on 26 October 2022.

Investment Rationale – SELL at GBX 825.00

• Profit Booking: The stock price has breached the target levels and Resistance levels provided in the latest report on 26 September 2022. Thus, it would be prudent to book profit at current levels.
• Declining Fundamentals: FRES has posted a significant YoY decline in top-line revenue and bottom-line profitability during H1 FY22.
• Labour Reform in Mexico: The labour reform in Mexico with regards to restricting subcontracting of labour had resulted in requirement of a high proportion of the contractor workforce. It may hamper the operational performance of FRES.
• Technical Standpoint: From a technical standpoint, the 14-days RSI of ~69.95 reflects that the stock is approaching an overbought territory.

Share Price Chart  

Valuation Methodology: Price/Cash Flow Approach (FY22E) (Illustrative)

Conclusion

Based on the notional gains, declining fundamentals, coupled with the unfavorable valuation conducted above, a "SELL" recommendation on Fresnillo PLC has been given at the current market price of GBX 825.00 (as of 04 October 2022 at 09:33 AM GMT+1).

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 04 October 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.

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