Renta 4 | ArcelorMittal (AM) has organised a visit for analysts to the Hazira plant in India, AM’s main facility in the country. AM created the JV in India (AM/NS India) together with Nippon Steel 60%/40% in 2019.
AM/NS India has generated $5.8 billion of cash since the acquisition of the assets and has invested the same amount in its growth, acquisition of mines, ports, power facilities, land. Despite the investment effort, debt has remained stable since inception due to the low investment intensity of the facilities.
The management has reiterated its goal to increase AM/NS production from 9 million tonnes to 15 million tonnes by 2026e (Phase 1) and to be able to produce high quality steels to supply the most demanding customers.
Total investment in Phase 1 is expected to reach $7,700 mn and EBITDA and operating cash flow – maintenance capex is expected to be 2.5x the previous level.
Phase 2A is capex efficient and will raise capacity to 18 mln tonnes by 2028e and Phase 2B would take the Hazira plant’s output to 24 mln tonnes by 2030e, making it the largest capacity mill globally.
Long-term plans call for a total AM/NS India capacity of 40 mln MT.
The Indian economy is expected to be the third largest in the world by 2028, with a GDP of around $5 trillion, and to be the fastest growing steel market in the next decade (CAGR 6%).
AM/NS India is expected to reduce emissions by 20% by 2030e (base year 2021).
Assessment: In our view, the entry into India and the growth strategy in the country are a great move for the future. AM/NS India has been contributing favourably to the group’s EBITDA for years, being the largest JV contributor, and we believe its growth capacity and contribution to the group will be very significant. Target Price Under Review (previously €35.6). Overweight.
