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On Friday, Citi analyst Ephrem Ravi increased the price target for Thyssenkrupp AG (ETR:TKAG) (TKA:GR) (OTC: TYEKF) shares to €11.00, up from the previous €8.50, while reaffirming a Buy rating on the stock. The upgrade comes as the stock has shown remarkable momentum, surging 29.6% in the past week and over 205% in the last six months. Ravi highlighted the potential for further re-rating of Thyssenkrupp, particularly focusing on the value of its marine business compared to its peers.
According to InvestingPro, Thyssenkrupp’s stock is currently trading near its 52-week high of $10.80, with analysts projecting a return to profitability this year.
The analyst pointed out that Thyssenkrupp’s marine business is undergoing a turnaround, boasting an order backlog exceeding €16 billion and having doubled its adjusted EBIT for two consecutive years. The anticipated spin-off of the marine division is seen as a significant event that could unlock value for shareholders in 2025. Additionally, ongoing restructuring efforts within Thyssenkrupp’s Steel Europe segment could provide further incremental positives. With a market capitalization of $6.46 billion and a healthy current ratio of 1.73, the company appears well-positioned to execute its strategic initiatives.
Ravi’s valuation of Thyssenkrupp’s marine business ranges between €5-8.3 billion, based on comparisons with the defence business of Rheinmetall (ETR:RHMG) AG, a peer company. This benchmarking exercise has led to the revised price target, which now assumes a 5x blended multiple to account for the sharp re-rating of defence peer companies.
The Buy rating reaffirmation comes with the expectation that Thyssenkrupp will continue to benefit from its strategic initiatives and the potential revaluation of its marine segment. The analyst’s comments suggest confidence in the company’s ongoing transformation and its efforts to improve profitability and create value for its shareholders.
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