The shares have risen 7% since September 10, the broker points out, while the silver price has fallen 9%.
UBS also highlighted the fact that the stock currently trades at 1.26 times its net asset value and 18.7 times this year’s project cash flow - 48% and 44% higher than the North American peer group, respectively.
It has therefore switched its recommendation to ‘neutral’ from ‘buy’ although its price target of £21 a share remains intact.
Fresnillo fell 72 pence or 4% in early trade and shares were changing hands for 1,812 pence.
“Despite the downgrade, we continue to believe the shares offer attractive exposure if silver and gold prices move higher. Fresnillo holds a well diversified portfolio of high-quality silver and gold assets,” analyst Chris Lichtenheldt said.