SSAB (Buy, TP: SEK85.00) - Q3 should mark the bottom
The Q2 report was solid across the board, but headwinds from lower prices and volumes in Q3 are likely to be more pronounced than expected. Reflecting this and SSAB’s slightly more cautious view on prices, we have cut our 2024–2025e EBITDA by 7–4%. However, we still see an attractive investment case, as it continues to offer appealing earnings multiples and offers plenty of cash on the balance sheet. We also expect the weakness in many of its markets to bottom out in Q3. We reiterate our BUY, but have cut our target price to SEK85 (90).Yet another solid quarter. Q2 EBITDA of SEK4bn was close to our estimate. On a positive note, earnings at all three steel divisions were slightly above our forecasts.
Market headwinds in Q3e. For the current quarter, SSAB sees lower prices for all three steel divisions, particularly Americas. It also sees lower prices in Europe and Americas, and slightly lower prices for Special Steels, where pricing is more stable. In addition, it has planned heavy maintenance work in Q3, estimated to involve costs of cSEK950m (largely unchanged estimate from the Q1 report).
SSAB is a supplier of high strength steels with products comprising various qualities and dimensions within wear steels and structural steels. Co.'s solutions also include services, from concept to finished delivery. SSAB Wear Services also provides advice, repairs, and sales of spare parts to the aftermarket. The business is organized into three business areas; SSAB Americas, SSAB EMEA and SSAB APAC as well as the subsidiary, Tibnor, which is a steel distributor in the Nordic region. SSAB EMEA consist of Europe, the Middle East and Africa; SSAB Americas of North and Latin America; SSAB APAC of Asia, Australia and New Zealand and Tibnor of steel and metal distribution in northern Europe.
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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