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Jefferies downgraded Nippon Steel Corp (5401:JP) (OTC:NSSMY) from Hold to Underperform Tuesday, cutting its price target to JPY2,400.00 from JPY3,200.00.
The downgrade reflects Jefferies’ concerns that Nippon Steel’s planned acquisition of US Steel will negatively impact the company’s financial performance across multiple timeframes.
Jefferies warned the deal could harm Nippon Steel in the short term, potentially forcing the company to reduce its FY3/26 earnings guidance and raise equity financing to fund the acquisition.
The firm also identified medium-term risks, including the need to finance additional investments and potential post-merger integration challenges, while long-term concerns center on limited capacity adjustment flexibility and decarbonization requirements.
Nippon Steel faces these headwinds as it pursues the significant US Steel acquisition, which Jefferies believes will "drag on its financials" throughout the short, medium, and long-term periods.
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