Renta 4 | A unique moment for the sector supported by greater control on imports is translating into the following: 1) A strong recovery in demand, both final (construction, catering and home appliances) and perceived (reconstruction of inventories on the part of stockists). 2) Increase in production: the previous point along with lower imports has fuelled a strong rise in plants’ utilisation rates. 3) Low inventory levels: In spite of the hike in output, higher growth in demand is keeping inventory levels in Europe and the US below the historic average. All the above has allowed for an improvement in base prices both in Europe and the US, a trend which is continuing at the start of 2022.
… which will translate into record results in 2021e and 2022e…In this scenario, we estimate that Acerinox will end 2021e with an EBITDA of 980,3 million euros, beating the 957,8 million recorded in 2006 and marking a new record high. Higher base prices from the start in 2022 both in Europe and the US, combined with the strength of demand, will allow Acerinox to register H1’22e EBITDA of over 700 million euros. And clock up a new record EBITDA figure in 2022e (1.143,4 billion euros R4e).
… sustainable in the medium-term, but…
At R4, we estimate that the improved outlook for the sector will remain at least during the next 2/3 years. This is thanks to the plans of excellence completed by the company, allowing them to lower the break-even level at all their plants. And also thanks to a more local global consumption due to: 1)protectionist measures, and 2) the increase in the cost of freights.
… with a very unfavourable performance vs competitors
We believe Acerinox’s relatively worse performance compared to its competitors is unjustifiable (+26% 2021 and -2% YTD vs the 71% and +1% of Outokumpu and 40% and +3% of Aperam). It is trading at lower 2022e multiples (EV/EBITDA 22e 2.3x vs 3.2x Outokumpu and 4.6x Aperam).
Conclusion: : OVERWEIGHT (TP 19,3 eur/share)
After the decline in the share price over the last few sessions, we are reinforcing our Overweight stance, backed by fundamentals which remain unaltered. In short: 1) the good moment for the sector being maintained for at least the next 2/3 years (fewer imports, higher prices and utilisation rates, economic stimulus plans), 2) synergies ahead of forecasts with VDM and 3) record 2021e and 2022e results.