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On Tuesday, Morgan Stanley (NYSE:MS) adjusted its stance on CSN Mineracao S.A. (BVMF:CMIN3:BZ), downgrading the stock from Equalweight to Underweight and reducing the price target to R$5.30 from the previous R$6.20. The downgrade reflects the firm’s view of a 4% potential decline from the stock’s current price level.
The decision to downgrade CSN Mineracao was influenced by what Morgan Stanley perceives as increasingly difficult supply and demand (S&D) dynamics that could negatively affect the company’s stock performance. Adding to the concern is the uncertainty surrounding CSN Mineracao’s expansion plans, particularly due to significant delays in the company’s primary growth project.
Morgan Stanley’s analysts have expressed that even with estimates that surpass the consensus, CSN Mineracao’s stock is trading at an approximate 4.7 times the expected 2025 enterprise value to EBITDA (EV/EBITDA) ratio. This valuation is about 15% higher than the historical average for the company.
The financial institution also highlighted the negative free cash flow (FCF) yield that CSN Mineracao is expected to experience. This concern arises from pre-payment agreements that are anticipated to strain the company’s working capital, further contributing to the less favorable outlook on the stock.
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