Ferrexpo PLC

Ferrexpo PLC (LON: FXPO) is an FTSE 250 Index listed iron ore pellet producer with mines in Ukraine (Poltava region) and sales operations internationally.

Investment Rationale – SELL at GBX 283.80

• Underperformance Against Index: FXPO has fallen over 38% in the past six months, reflecting underperformance against the FTSE 250 benchmark index.
• Reduced Sales: In Q4 FY21, FXPO reported a 6% year-on-year decline in sales volume.
• Operational Risk: The Company’s performance can be impacted by equipment failures and production stoppages amid supply chain snags and resurgence in Covid-19 cases.
• Ukraine Crisis: The ongoing tension between Russia and Ukraine may hamper the mining operations.
• Technical Indicator: From a technical standpoint, Bollinger Bands suggests that the price is close to the upper Bollinger Band, while the 14-day RSI (~58.22) is also in the overbought position.

Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative) 

* Peers: EVRAZ plc, Vast Resources PLC, Oriole Resources PLC, Metals Exploration PLC.             

* All the peers are selected from the Basic Materials sector as classified on the LSE Website.          

* 1 USD= 0.73755 GBP       

Conclusion                                

Based on the decreased total sales volume, macroeconomic uncertainties, coupled with the unfavorable valuation conducted above, we have given a “SELL” recommendation on Ferrexpo PLC at the current market price of GBX 283.80 (as of 10 February 2022 at 11:15 AM GMT). 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level that 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.

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