Metals and Mining
January 17, 2013
We foresee a short-term decline in Ferrexpo’s share price and therefore place a SELL recommendation on the FXPO stock with 1-month target price of USD 3.43, implying a downside of 19%. We view the stock as clearly overbought, based on its current 6% 2012E EV/EBITDA discount to the “Big 3” global iron ore stocks, down from the full-year 2012 average discount of 22%. We also expect a double-digit decline in iron ore prices in the coming weeks as ore restocking by Chinese steel mills fades and supply improves. The correlation between global iron ore prices and the FXPO stock price is nearly 90%.
