Fresnillo gets golden glow as US bank tips 27% upside and 11% dividend yield7 Aug 2025 20:46
Fresnillo gets golden glow as US bank tips 27% upside and 11% dividend yield
Fresnillo PLC (LSE:FRES) run may be far from over, according to JP Morgan, which has lifted its price target on the Mexican precious metals group to a Street-high £21 per share, implying around 27% upside from current levels.
The bank, which has had an “overweight” rating on the stock for some time, said that even after a 175% rally this year, Fresnillo still offers more to investors, thanks to a powerful mix of stronger production, rising gold prices and the prospect of double-digit cash returns.
“Nevertheless, we still see room for Fresnillo shares to run further,” JPM said.
At the heart of the call is its view that gold is heading higher, potentially much higher.
Its commodities team expects the gold price to climb by about 20% to more than $4,000 per ounce by mid-2026, driven in part by likely interest rate cuts from the US Federal Reserve.
Remember, silver (Fresnillo's main focus) has been on a tear of late as an alternative store of value to the yellow metal.
Lower rates typically make gold more attractive, especially for central banks and buyers of exchange-traded funds.
For Fresnillo, a rising gold price isn’t the only tailwind. Production is also picking up.
After a difficult few years of declining output, the company recently upgraded its 2025 production guidance and, according to JP Morgan, is on track to stabilise gold output well into the next decade through additional investment in its existing mines.
That improved operational backdrop is translating into better financials. The analysts now expect earnings before interest, tax, depreciation and amortisation (EBITDA) in 2025 to be 10% higher than previously forecast, with a smaller uplift in 2026. That puts JP Morgan’s estimates just ahead of consensus.
Balance sheet strength is also starting to stand out. The bank reckons Fresnillo will move into a net cash position of around $1.3bn by the end of 2025, equivalent to roughly 8% of its market value.
Add in the base dividend, and total shareholder payouts could reach 11% of the share price, JP Morgan said, the highest yield among its European and Middle Eastern mining coverage.
Valuation, meanwhile, still looks reasonable. Even after the share price rebound, the stock trades at just over 7 times expected 2025 earnings on an enterprise value to EBITDA basis, still below its long-term average of 8 times and well under the pre-2018 average of 12 times.
That leaves room for further re-rating, JPM believes. “With Fresnillo trading at 2025E/2026E EV/EBITDA of 7.1x/6.8x and 8%/7% free cash flow yield, we reiterate our Overweight rating,” it said.
The price target has been lifted from £18.50 to £21 per share.
The shares were up 1.3% at 1,676p in afternoon trading on Thursday.
https://www.proactiveinvestors.co.uk/companies/news/1076264/fresnillo-gets-golden-glow-as-us-bank-tips-27-upside-and-11-divid
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