Aluminum Expert Takeaways: Soaring Scrap Spreads for Longer

Research evidence excerpt

Aluminum Expert Takeaways: Soaring Scrap Spreads for Longer

Industry Update Equity Research

Investment Thesis, Valuation and Risks

Constellium SE (CSTM)

Investment Thesis

Our Overweight rating reflects 2026E upside vs FactSet consensus from a widened Midwest aluminum premium vs used beverage can

spread. We also see potential for valuation rerating as aerospace recovers and as CSTM gets added to U.S. indices.

Target Price Valuation for CSTM

Our $39/shr price target uses a blended average of 6.5x 2026E and 7x 2027E EV/EBITDA on our above-consensus 2026E/27E EBITDA

forecast. Our target multiple ranks above its three-year average 5.4x. We believe the higher multiple than its recent track record can be

justified by still soft end market conditions, and a potential re-rating higher as it continues to buy back shares and demonstrates improved

operations after disruptions plagued 2024.

Risks to Our Price Target and Rating for CSTM

Key risks include: 1) unexpected operational disruptions; 2) greater competition from other players in the industry; 3) any relief in

import tariffs or other adverse trade policy; 4) weaker-than-expected or better-than-expected demand in key end markets—aerospace,

packaging, industrial, and auto. In particular, we see execution risks and uncertain demand in Europe.

Steel Dynamics, Inc. (STLD)

Our Overweight rating reflects expectations for recent outsized investments to boost results and FCF in 2026 beyond peers. Shares could

also benefit more than peers from our near-term constructive sheet price view, and upside from its new aluminum rolling mill.

Target Price Valuation for STLD

Our $235 PT reflects 9.5x 2027E EV/EBITDA. The higher multiple than its historical 10-year average 6.9x reflects considerable upside to