Jefferies cuts 2023 forecasts for European steel, prefers OCTG names

Kloeckner & Co SE

17/10/2022 15:22

** Jefferies flags downside risks to current EBITDA
consensus for European steel makers, expecting soaring energy
prices to add to seasonal weakness
    ** Within sub-sectors, it cuts 2023 EBITDA forecasts by 18%
for stainless and 11% for carbon, but raises them by 19% for its
favoured field OCTG (oil country tubular goods)
    ** Decline in volumes and margins in the latter half of Q3
was worse than expected, Jefferies says, as the typical demand
recovery in September, especially in the automotive sector, did
not occur
    ** It adds Q4 will face the combination of seasonally and
cyclically weak demand and high energy prices
    ** Within its coverage, Jefferies is ahead of consensus only
for Tenaris  TENR.MI  ("buy") and Vallourec  VLLP.PA  ("buy")
from OCTG names, and SSAB  SSABa.ST  ("buy") and Voestalpine
 VOES.VI  ("hold") from carbon
    ** It raises Tenaris's TP to EUR 22 from EUR 20, as its
strong balance sheet provides backstop to market volatility and
capacity for higher dividends in the medium term
     ** It raises TP for Vallourec to EUR 19 from EUR 17 on its
"reset balance sheet" after a long restructuring process
    ** It also likes SSAB and ArcelorMittal  MT.LU  ("buy"),
with the former "arguably better positioned near-term" given
U.S. energy/infrastructure exposure and reduced volatility in
its Special Steels business
 (Reporting by Olivier Sorgho)
 ((Olivier.Sorgho@thomsonreuters.com))