MS prefers European carbon steel over stainless, downgrades Outokumpu

Outokumpu Oyj

09/10/2024 10:11

** Morgan Stanley sees better risk-reward in European carbon
steel stocks after China's policy pivot, as stainless steel
makers may see possible benefits with a lag
    ** It sees a clearer path to better demand prospects for the
ferrous metals, such as iron ore, coking coal and carbon steel,
and base metals
    ** MS points to stainless steel sector's greater exposure to
consumer demand, which has a limited chance of meaningful
stimulus in the near term, and notes Chinese stainless steel
exports have been less of a drag for the sea-borne market
    ** It sees mixed signals into Q3 results, as Europe's
recovery prospects are sluggish and there is increasing evidence
of a U.S. slowdown
    ** It downgrades Outokumpu  OUT1V.HE  to "equal weight" on
weaker earnings momentum, growth capex uncertainties and fading
valuation discount to peers
    ** MS adds Outokumpu, unlike its peers, is purely focused on
stainless steel with no meaningful diversification to more
defensive earnings pillars, such as speciality alloys
    
RATING AND PT CHANGES:
 COMPANY     RATING        OLD RATING  PT         OLD PT
 Outokumpu   Equal weight  Overweight  EUR 4.30   EUR 4.70
 Acerinox    Overweight    n/a         EUR 13.20  EUR 13.80
  ACX.MC                                          
 Aperam      Equal weight  n/a         EUR 30.00  EUR 31.00
  APAM.AS                                         
 
 (Reporting by Marta Frąckowiak)
 ((marta.frackowiak@thomsonreuters.com))