Broker tips: Fresnillo, Babcock

(Sharecast News) - Analysts at Berenberg downgraded leading silver producer Fresnillo to 'hold' from 'buy' after "a stellar run" in its share price. Berenberg said the shares' solid performance was driven by a mixture of improved operational performance and "a material run" in gold and silver prices, with Fresnillo's role as "the world's largest primary miner of silver" benefiting from the impressive run of the silver price through a record $120 per ounce, beforefalling back to $85 per ounce currently.

"We continue to see attractive mark to market upside for Fresnillo (we envisage c19% mark to market upside for 2026E EBITDA on our base case price deck versus consensus and c4% upside at spot, and while we are c21% ahead of consensus for our 2027E EBITDA (c19% ahead at spot), we do believe that the market is largely expecting material mark to market upside momentum, and absent a material kick-on in gold and silver prices over 2026," said the German bank, which hiked its price target from 3,400p to 3,800p.

"We update our model for our revised price deck and the company's recent Q4 operational update, as well as 2026 guidance. Our estimates move higher on our higher forecasts, and we also model in some medium-term inflation and a stronger Mexican peso. We lift our multiples to 1.5x NAV and 8x 12-month forward EBITDA."

The German bank added that Fresnillo was currently trading on 1.83x net asset value and 6.9x underlying earnings.

Citi downgraded Babcock on Thursday to 'neutral' from 'buy' but increased its price target on the stock from 1,338p to 1,554p as it said the firm's medium-term guidance was conservative.

"The key question is how conservative and what does that mean for valuation? We estimate that taking the low end of guidance, the fair value is 1,119p, so the market is already pricing in more," Citi said. "Flexing the drivers, we establish a range of fair values up to 2,000p, with our base case fair value of 1,464p.

Citi then added an additional 90p of optionality from Babcock's participation in X-Energy's AMR and Rolls-Royce's SMR programs to give its new target price of 1,554p - and with only roughly 8% upside, it chose to downgrade the stock to neutral.