On Tuesday, Jefferies financial firm adjusted its expectations for Salzgitter AG, a steel manufacturing company. The price target for Salzgitter AG (SZG:GR) (OTC: SZGPY) was reduced to €26.00 from the previous €27.00, yet the firm retained a Hold rating on the stock.
The revision comes in light of anticipated changes in the European steel market and the company's financial projections.
The analyst from Jefferies indicated that the forecast for a second-half 2024 recovery in European steel demand and restocking has been delayed, now expected to occur in the fourth quarter of 2024 to 2025. Consequently, the firm has decreased its EBITDA estimate for Salzgitter AG by 22% to €582 million, aligning with the company's revised guidance range of €550-625 million, which was previously set at €700-750 million.
Salzgitter AG's long-term value is acknowledged by Jefferies, noting that the company's sales are significantly based in the European Union, with 46% in Germany and 79% across the EU. However, the firm highlighted challenges such as elevated capital expenditures leading to a negative free cash flow yield over the period from 2024 to 2026, along with an increase in net debt.
Despite these financial adjustments, Jefferies maintains a Hold rating on Salzgitter AG. The firm's stance is influenced by the current state of the EU steel markets and the absence of immediate catalysts for recovery in the near term, as described in the analyst's remarks.
InvestingPro Insights
As investors digest the latest assessment from Jefferies on Salzgitter AG, real-time data and insights from InvestingPro provide a more granular view of the company's financial health and market position. According to the latest metrics, Salzgitter AG (OTC: SZGPY) is trading at a low Price / Book multiple of 0.25, suggesting that the company's market valuation is conservative relative to its book value. This aligns with the InvestingPro Tip that the company is trading at a low revenue valuation multiple, indicating potential undervaluation based on its revenue streams.
Moreover, analysts are optimistic about Salzgitter AG's profitability, predicting that the company will be profitable this year, which is corroborated by the fact that it has been profitable over the last twelve months. This is reflected in the company's P/E Ratio, which stands at a reasonable 16.8, and adjusting for the last twelve months as of Q1 2024, the P/E Ratio further improves to 12.87.
Despite a challenging European steel market, Salzgitter AG's Gross Profit Margin remains solid at 30.43%, showcasing the company's ability to maintain profitability in its operations. However, it is important to note that the company has experienced a decline in revenue growth, with a -14.41% change over the last twelve months as of Q1 2024. This may be a factor for investors to consider alongside the company's strengths.
For those looking to delve deeper into Salzgitter AG's financials and market potential, additional insights are available. There are four more InvestingPro Tips for Salzgitter AG, which can be found at https://www.investing.com/pro/SZGPY. Investors interested in leveraging these insights can use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing a comprehensive toolkit for informed investment decisions.
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