Salzgitter (AO) | Buy | Headline weakness, underlying stability (Q2 Preview)

Research evidence excerpt

Salzgitter (AO) | Buy | Headline weakness, underlying stability (Q2 Preview)

Salzgitter Buy | Target Price: EUR70.00

Company description Management

With a crude steel capacity of 7 Mtpa, Salzgitter is the third-largest steel Heinz-Gerhard Wente

manufacturer in Germany and among the top ten in Europe. Apart from being a Gunnar Groebler

leading strip and long steel producer in Germany, Salzgitter has strong market Birgit Potrafki

positions in heavy plates and tube products in Europe. Through the acquisition Key shareholders

of Kloeckner-Werke in 2007, it has diversified into the machinery sector, and also Free float 38.40%

owns a c. 30% stake in the German copper smelter and recycler Aurubis. State of Lower Saxony 27.90%

GP Günter Papenburg AG 9.60%

Salzgitter AG 9.90%

Investment case Valuation methodology

As a German steelmaker, Salzgitter is particularly well Our SOP model derives a fundamental fair value of c. EUR70,

positioned to benefit from support plans for the steel industry in applying EV/EBITDA (12M fwd) of 4.6x for Steel, 7.1x for Trading,

Europe (CBAM, new Safeguards), as well as from the 5.0x for Technology, and using the market value for the 30%

acceleration of German spending on infrastructure and defence. stake in Aurubis as well as an estimated c. EUR1.1bn market

External support should combine with an efficiency plan value for the acquired CO2 certificates.

targeting EUR 0.5bn in savings over 2022–2027, more than half Risks to our rating

of which is expected to be delivered in 2026–2027. Limited support from European and German policy measures.

Sound cash management means the group is not currently Prolonged weakness in steel demand combined with persistent

forced to divest its non-strategic assets, but the portfolio overcapacity.