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Q1e: lower prices, higher volumes, and strike impact. '24e EBIT up 6%, driven by Europe, but '25e-'26e fairly flat. Keep SELL: declining prices and mediocre distribution.
SSAB SSAB AB Class B
Q1e moving parts: lower prices, higher volumes. EBIT +6-2%, but we are still below pre-Q4 Infront consensus. We keep SELL as prices come down, TP SEK 59 (55).
Q4e: lower prices and more planned maintenance. '24e-'25e EBIT down 2-1%, mainly on stronger SEK. We keep SELL, TP unchanged at SEK 55.
Negative earnings momentum ahead as US plate price normalises. Capex pipeline limits distribution despite SEK 17bn net cash. Initiate with SELL, TP of SEK 55 (21% downside).
The Q3 23 results were solid, coming in above the consensus and our own expectations. The Special Steel business as well as the “Americas” proved resilient in terms of prices while Europe and the “side-businesses” suffered. Lower input costs led to satisfactory results. The sound cash generation led the group to suggest a share buy-back (up to 4.5% of the share capital at the current price). We will revise our forecasts and target price a tick upwards.
After having made a remarkable habit of beating expectations, SSAB fell short this time around. Q2 EBITDA missed by quite a margin while the company''s continued silence treatment on the buyback frustrated many. But is the worst daily drop in share price (just next to GFC, COVID) warranted? We hosted the company''s CEO Martin Lindqvist and CFO Leena Craelius and got some answers. With the buyback still resolutely on the table and the plate outlook solid, our forecasts are largely unchanged and our price target still north of SEK 100/sh. Reiterate Outperform. Modest cut to FY23; FY24 earning trajectory intact, ~50% of volumes show de-risked outlook Looking ahead, delayed US plate shipments will flow into Q3, boosting Americas performance while Special Steel price pressure should remain modest as QandT demand holds (~50% of group shipments are specialized/standard plate). Europe is clearly a concern, but management flagged its preventive approach to costs and shared a confident view on carbon-driven supply discipline. Buyback: third time''s the charm? Management explains its ''timing issue''. The EBITDA miss and lack of buyback eclipsed SSAB''s otherwise strong Q2 cash performance (+SEK 1.0b versus cons). The FCF outlook is solid, with strong cash conversion expected into H2, with potential further reduction in working capital. Management insists that the buyback is only a question of timing now with the dividend payment behind us. With gearing to fall below target in Q3, October could act as a hard deadline. But what are the risks? Large MandA? We don''t think so. Some organic growth? Maybe, but of limited scale (although there is space for a new US plate mill). Decarbonization? Yes, some cash is likely to be kept as a ''war chest'' as Nordics'' governments remain reticent to emulate German/French more generous subsidy policies. EU risks more than priced in, US upside underappreciated. PT unchanged, with 60% upside Net-net, our price target is unchanged...
SAAB released Q223 numbers which were almost in line with the street’s expectations. That said, the market focused on the deteriorating outlook going in to Q3 and possibly the end of the year. Europe, in particular, remains a concern. In this context, we will most likely revise downwards our numbers, at least for FY23.
The very strong set of Q1 results did little to shield our steel coverage from cyclicals'' fall from grace over the past month. In this Head-to-Head, we play our EU coverage''s worst (ArcelorMittal) and best performer (SSAB) against each other. While in our view the market continues to underestimate plate''s strength for SSAB, it''s hard to beat ArcelorMittal on capital allocation. And if valuation looks even more compelling now (50% upside) for both, SSAB is firmly ahead on decarbonization, thanks to its superior energy position. Net-net, we keep our preference for SSAB. Strong guidance drive earning upgrades; upside risk remains for SSAB (+10% above cons.) MT and SSAB delivered strong results in Q1, both benefiting from their exposure to the booming North American market. As expected, conservative Q2/FY23 expectations are now resetting higher on the back of particularly robust guidance. But the margin trajectory for SSAB''s standard and special plate businesses remains underappreciated, leaving us +10% above FY23 consensus. While we see less upside risk for MT, we see growing evidence that margins have now structurally re-set higher. Now is the time for MT and SSAB to pull the trigger on their buyback programs In this note, we hike our FCF forecasts for the year, supporting greater shareholder returns. We now expect MT to be able to buy back ~USD 1.0b worth of shares this year. Meanwhile, we note that SSAB gearing would remain at the middle of the target range even after the execution of a ~SEK 10.0b buyback program. Market weakness opens opportunities, raising hopes for prompt execution. 50% upside to shares can''t be ignored for too long, despite negative pricing momentum While bandying the word ''cheap'' at the onset of a pricing correction has never proved particularly helpful, we also feel compelled to flag +50% upside opportunities based off a conservative price deck (even if timing not valuation is key for now). And while there are...
SSABA SSABB MT
The Q123 results came in higher than consensus. Of course, they were down compared the fantastic FY22, but held up reasonably well, in particular thanks to volumes. This bodes well for the Swedish group in terms of its ability to post sound results going forward. That said, the momentum in the sector has partly faded away and it is becoming increasingly difficult for players to post strong share price performances.
Four years have passed since our last visit to SSAB Nordics system. Since then, much has changed with the steelmaker on a structurally better footing to tackle carbon neutrality. This week''s Capital Market Day provided us with confidence on near-term market trends, visibility on the EAF transition economics and new mix/volume targets built on the back of the Special Steel division''s success story. Some uncertainties remain while the capital allocation framework could have been improved. But we believe SSAB''s current and future competitive position can hardly be matched across Europe. SSAB remains our EU top pick with our price target well above consensus with ~30% upside. The new and the future SSAB: mix, volume, and cost improvement Management echoed the constructive message heard at our annual conference on near-team pricing, demand dynamics and longer-term fundamentals. New FY30 mix and volumes targets should yield SEK 3.6b benefit while carbon cost avoidance and lower fixed costs could boost EBITDA by a further SEK 5.0b. Normalized EBITDA could even double accounting for net green steel premiums (EUR 300/t today). In the US, strong market tailwinds should support plate margins higher. Decarbonization: execution faces several pitfalls but there is no better strategy in Europe Decarbonization was on everyone''s lips notably following Salzgitter''s recent green capex hike and Voestalpine''s ground-breaking decision not to build a DRI facility in Europe. SSAB kept its strategic budget of SEK 50b unchanged and did a good job highlighting its unique competitive energy position. But a few questions remain unanswered notably on the future of Hybrit, the grid situation at Lulea or general green hydrogen economics, limiting visibility (although there is still time and optionality). Capital Market Day helps the equity story; SSAB is our EU top pick with ~30% upside We take the communication around the CMD/site visit positively, as it confirms our...
The group posted, as expected, record results for FY22. The momentum of the steel market has faded away, but to a lesser extent than feared so far. Price (and margins) will still decline going into Q1 23. We will revisit our estimates after this release, as well as integrate the likely share buy-back.
A very decent set of numbers for Q3 22. The outlook calls for a degree of slowdown in Q4. We will adjust our numbers a tick to the upside for FY22, with no major impact on valuation. Despite its low valuation ratios, the stock still suffers from unfavorable momentum.
SSAB SSAB AB Class A
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