voestalpine raised to BUY, TP EUR 41 - Compelling value proposition
We upgrade voestalpine to BUY from HOLD. The shares offer an upside potential of roughly 30% to our revised target price of EUR 41 (EUR 38.5)The group is on track to deliver new record EBITDA of up to EUR 2.2 bn in FY 21/22e. We acknowledge that this should represent the peak and concerns about negative earnings momentum as well as the sustainability of the steel spreads/market dynamics
The recent uptick of call-offs from the auto sector and a decent outcome of recent steel contract negotiations with OEMs let us deduce an improved outlook for the groups largest customer industry. Also, the oil price driven demand recovery in the O&G sector bodes well
A P/B ratio of just 0.8x suggests that the stock is priced for returns below its CoE and below our forecasts. Trading multiples have de-rated to levels well below the longer-term valuation
We also like the group for its FCF yields that we project at ~8% on average, although we would appreciate more granularity on its capital allocation policy
voestalpine is engaged in the production, processing, and distribution of materials made of steel and in research and development in the areas of metallurgy, metal processing, and materials technology. Co.'s steel division focuses on the production and processing of flat steel products. Co.'s special steel division is involve in tool steel and high-speed steel. Co.'s metal engineering division is engaged in turnout technology, rails and treated wire, and tubes. Co.'s metal forming division is involve in tube products and precision strip steel as well as pre-finished system components. Co.'s other activities include heavy plate production, a foundry, and a number of downstream processes.
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
The Institutional Equity Research team consists of roughly 15 analysts, both in Vienna and the CEE countries. Our analysts provide long-standing sector expertise in tandem with profound local market know how and a sectoral approach across the entire region.
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