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On Friday, Kepler Cheuvreux initiated coverage on Kloeckner (ETR:KCOGn) & Co SE (KCO:GR) with a Buy rating and a price target of EUR8.10. The firm’s analysts highlight the company’s strategic shift towards more promising opportunities in North America and the high-value-added metal products and services sector as a key driver for future growth.
Kloeckner & Co, which presented its new strategy in May 2021, has since redirected its focus from underperforming areas in Europe and the commodity steel distribution market. North America now represents approximately 60% of the group’s sales, with high-value-added products comprising around 40% of the business mix. This transition is expected to yield better margins and lower volatility for the company.
Despite facing challenges due to declining steel prices since 2021, Kepler Cheuvreux anticipates a rebound in steel prices starting from 2025. This recovery is expected to make the company’s qualitative shift more apparent and support predictions of significant EBITDA growth in the subsequent years.
Kepler Cheuvreux’s analysts believe that the anticipated growth and rerating potential are not yet reflected in Kloeckner & Co’s current stock valuation. The stock is presently trading at a discount compared to its historical average and its United States counterparts. The new price target of EUR8.10 suggests a 45% upside from its current level, indicating a strong potential for stock appreciation.
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