Ferrexpo PLC (LSE:FXPO), one of the world's largest iron-ore pellet producers, could be a pick for deep-value investors despite most of its operations being in Ukraine, analysts at Credit Suisse believe.
The Swiss bank rates the business ‘neutral’ but does “see some potential investment drivers for those who can withstand Ukraine/Russia war risk.”
Firstly, the operating environment in Ukraine has been improving, with Credit Suisse noting that attacks on energy infrastructure in the war-torn country have dropped.
Additionally, Ferrexpo still maintains a healthy balance sheet after its net cash position remained the same in 2022.
Credit Suisse believes that if the war was to end in 2024 and operations were to return to 100%, the company's net present value (NPV) points to 70% upside to the current share price.
Even assuming the war ends in 2026, it would still provide an NPV 46% greater than the share price.
“On our modelling, the shares currently price in recovery to 100% operating rate by 2031,” the bank’s analysts said.
The FTSE 250 constituent may also be well equipped to grow post-war as its operations remain far away from the conflict zone, plus there is a strong demand for iron ore pellets caused by the decarbonisation of the steel industry.
Ferrexpo also owns logistic assets like barges and railcars which could help with a return to seaborne markets, especially to reach Chinese steel mills, should Ukraine have its access to the Black Sea restored.
Credit Suisse target a 140p price for Ferrexpo shares, around 35p higher than the 115p value it began trading at on Tuesday.