Penoles Falls as Credit Suisse Cut Stock Recommendation

Industrias Penoles SAB, the second- biggest Mexican mining company by market value, tumbled the most in 16 months after Credit Suisse Group AG cut its rating and said the company might face additional taxes.

The shares fell 4.8 percent to 553.13 pesos at the close in Mexico City, the biggest drop since October 2011. The stock was the biggest loser today on Mexico’s Benchmark IPC index, which rose 0.2 percent.

Penoles, which produces silver and gold, is trading at an 11 percent premium to its net asset value, compared with an average discount of 29 percent over the past three years, Credit Suisse analysts led by Santiago Perez Teuffer said in a report dated yesterday. Their recommendation on the stock dropped to neutral from the equivalent of buy.

A government proposal to reform Mexico’s fiscal structure that may come as early as this year might include mining taxes, the analysts said. Mining makes up about 65 percent of the company’s earnings before interest, taxes, depreciation and amortization, according to the analysts.

“Taxes in this business segment would represent a significant risk,” the analysts wrote.

Credit Suisse’s target price for Mexico City-based Penoles is 650 pesos, which assumes an effective tax rate of 30 percent, according to the report. The target price would be 7.8 percent lower if the tax rate increased to 42.5 percent, the analysts said.

To contact the reporter on this story: Danielle Verbrigghe in New York at

To contact the editor responsible for this story: David Papadopoulos at

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