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Investing.com -- Morgan Stanley raised price targets for several European steelmakers in its latest sector review, though analysts maintained mixed ratings across the group, citing a sharp re-rating of shares despite muted demand fundamentals.
The brokerage increased ArcelorMittal SA’s target to €32.20 from €30 while keeping an Equal-weight rating.
Analysts applied a through-the-cycle EV/EBITDA multiple on normalized 2026-2028 earnings, arguing this “provides a more fundamental reflection of the business value and looks through the typical cyclicality of the steel industry.”
However, they noted that the re-rating of ArcelorMittal shares was “out of sync with the earnings impact from any potential Ukraine rebuild, German stimulus and EU supply-side policy.”
SSAB AB’s target was cut to SKr 57.00 from SKr 61, with an “equal-weight” stance reiterated. The bank cited downside risks from decarbonization costs and weaker free cash flow.
“We maintain our Equal-weight rating but see downside risks to SSAB’s valuation multiples in light of its extensive decarbonisation spending programme and pressured FCF,” analysts said. They added that valuation remained undemanding compared with peers.
Voestalpine AG saw its target lifted to €30.20 from €25.60, and Morgan Stanley kept an “overweight” rating, highlighting resilience in earnings per ton and benefits from infrastructure-linked demand.
The brokerage pointed to the company’s manageable decarbonisation costs and exposure to railways and automotive as supportive factors.
Salzgitter AG’s target rose to €17.90 from €15.60, though the stock stayed at “underweight.”
Morgan Stanley said the higher valuation reflected a historical EV/EBITDA multiple, but warned that “cash burn is likely to intensify, given the need to spend on decarbonisation initiatives, while we feel that the current valuation level does not offer a sufficient margin of safety.”
Thyssenkrupp AG’s target edged up to €8.60 from €7.60, with an “underweight” rating maintained.
The brokerage pointed to restructuring hurdles, decarbonization spending, and cash flow volatility, though noted potential support from portfolio changes and asset sales.
Analysts stressed that European steel valuations had already moved sharply higher. The report said equities “have re-rated, pricing improved framework into 2026,” with multiples expanding 26% year to date while 2026 consensus EBITDA expectations fell 5% on average.
Despite recent momentum, the bank warned demand remained subdued. “Recent price momentum—underpinned by three consecutive ArcelorMittal hikes— driven more by policy uncertainty than by end-use recovery,” it said.
Policy remains the dominant driver, according to the report. The European Commission is expected to decide on replacing existing safeguard quotas by late September or early October.
The steel association Eurofer has called for a 50% quota cut, which Morgan Stanley said “would materially re-base profitability for domestic mills,” though it expects a more balanced outcome.
While acknowledging that policy changes could provide upside, the report added that near-term fundamentals remain muted. “A bull case scenario––a 50% cut in quotas, as well as earlier implementation––could drive further upside from current levels,” analysts said.