SELL despite raw material tailwind
Prices of key raw materials ferro-chrome and nickel have rallied in the past month, providing a tailwind for Outokumpu’s Q4 2017e earnings. We have updated our 2017–2019e raw material prices, but are still 9% below consensus on 2018e EBITDA. We have raised our target price to EUR7.1 (EUR6.1), reflecting 2018e EV/EBITDA of 7.0x, but we reiterate our SELL recommendation.Outokumpu is organized into the following five business areas: Coil Europe, Middle East and Africa, which consists of stainless operations as well as ferrochrome production in Europe; Coil Americas, which produces standard austenitic and ferritic grades as well as tailored products; APAC, which includes cold rolling facility and coil and plate service center in China, as well as a coil service center in Australia; Quarto Plate, which is comprised of the quarto plate production facilities in Sweden and in the U.S.; as well as Long Products, in which its products are used in a range of applications such as springs, wires, surgical equipment, automotive parts and construction.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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