Recycling Technology Investments Will Secure Future Competitiveness In Aerospace And Automotive Sectors

Key Takeaways

• Strategic diversification into automotive and aerospace aims to drive revenue growth and boost margins amid rising aluminum demand.
  
• Commitment to sustainability and recycling supports long-term competitiveness, attracting ESG-focused investors and enhancing niche market leadership.
  
• Supply chain disruptions, tariffs, and geopolitical tensions may pressure AMAG's profits and margins, compounded by industry reliance and recent impairment losses.

Catalysts

Engages in the production, processing, and sale of aluminum, aluminum semi-finished, and cast products in Austria, Europe, North America, and internationally.

• AMAG Austria Metall is working towards significant product diversification, notably by obtaining new qualifications with automotive and aerospace OEMs, which is expected to open new markets and drive revenue growth.
  
• The company's strategic shift in product mix towards automotive, aerospace, and transport is anticipated to capitalize on growing aluminum demand in these segments, potentially boosting net margins.
  
• Investment in recycling technology and environmentally sustainable aluminum products positions AMAG for long-term competitiveness and may enhance earnings through niche market leadership in low-emission, high-recycled-content aluminum products.
  
• AMAG's strong sustainability credentials, supported by high-tier ratings from agencies like Sustainalytics and EcoVadis, are likely to bolster customer relationships and attract ESG-conscious investors, potentially aiding in revenue stability and growth.
  
• Despite potential short-term alumina price pressures, AMAG's solid cash flow and operational flexibility, including managing capacities and markets, are key to maintaining stable earnings and leveraging long-term demand increases in the aluminum sector.

AMAG Austria Metall Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming AMAG Austria Metall's revenue will grow by 4.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.0% today to 4.7% in 3 years time.
• Analysts expect earnings to reach €77.7 million (and earnings per share of €2.2) by about March 2028, up from €43.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €88.5 million in earnings, and the most bearish expecting €66.9 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.9x on those 2028 earnings, down from 21.2x today. This future PE is lower than the current PE for the GB Metals and Mining industry at 21.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.55%, as per the Simply Wall St company report.

AMAG Austria Metall Future Earnings Per Share Growth

Risks

• AMAG's revenues are likely to be impacted by the significant increase in alumina prices due to supply chain disruptions and production problems, which may affect profitability in the first half of 2025.
  
• The company's earnings might face pressure from potential U.S. tariffs on aluminum products imported from Canada and Europe, causing pricing and logistic uncertainties for their shipments.
  
• There is a risk to the Casting division's performance due to its reliance on the European automotive industry, which continues to experience challenging market conditions, potentially impacting revenue and margins.
  
• The geopolitical tensions and possible tariffs could result in higher costs and uncertainty for AMAG's upstream operations, potentially squeezing margins and earnings.
  
• The company has faced recent impairment losses in its AMAG component business and tax-related impacts, which could signal underlying issues affecting its net margins and overall financial health.

Valuation

• The analysts have a consensus price target of €25.933 for AMAG Austria Metall based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.6 billion, earnings will come to €77.7 million, and it would be trading on a PE ratio of 14.9x, assuming you use a discount rate of 8.6%.
• Given the current share price of €26.0, the analyst price target of €25.93 is 0.3% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.