Analysts at Liberum Capital have trimmed their target price for Ferrexpo PLC (LSE:FXPO) to 250p from 275p but retained a 'Buy' rating on the stock after cutting production forecasts because they expect Ukraine war-related power issues to drag on.
The analysts said: "Russia’s continued focus on disrupting Ukraine’s energy infrastructure pre-winter will likely result in further operational downgrades near-term for Ferrexpo. We are cutting our production and sales forecasts in H1’23 to 2.3Mt, then ramp back to capacity by Q3’23."
"As expected, European pellet demand is under pressure, with blast furnace pellet premia setting for Q1 at US$44/t, down from $68/t in Q4, slightly below Liberum’s estimate of $46.8/t. We estimate end of year cash of c.$110mln," they added.
On November 1, Ferrexpo said they had been notified of a “partial resumption” of its operations in central Ukraine after production was suspended following Russian missile strikes which damaged power lines.
Despite repairs on the state electrical infrastructure, the iron ore producer said the supply of power to its plant is “variable and limited”, which makes it less cost-effective.
This led the FTSE 250-listed group to use what power it has to focus on drawing down stockpiles of finished iron ore products to supply to customers. These stockpiles have been used to ensure a “consistent supply” to customers since production was halted after the Russian missile attacks.
Ferrexpo said it had “sufficient stockpiles to meet customer demand”.
In late afternoon trade on Friday, Ferrexpo shares were trading at 150.70p.