SZG: Regulatory Support Will Likely Fail To Justify Elevated Equity Multiples

We are raising our Salzgitter price target by approximately EUR 5 to about EUR 34, as analysts increasingly highlight multi year regulatory support and improving prospects for higher equity multiples, which is reflected in multiple recent rating upgrades and higher Street targets toward EUR 40.

Analyst Commentary

Recent research updates underscore a shift in sentiment toward Salzgitter, with several firms revising both ratings and target prices as they reassess the companys regulatory backdrop, earnings power, and equity rerating potential.

Bullish analysts highlight that the combination of multi year regulatory protections and leverage to European flat rolled pricing from 2026 supports a structurally higher earnings profile and scope for multiple expansion from current levels. This is reflected in several upgrades to more positive ratings and price targets clustered around EUR 40, implying meaningful upside from prior expectations.

At the same time, there remains a contingent of more cautious voices, particularly where valuation has already moved closer to revised targets or where execution risk around the medium term earnings bridge is seen as underappreciated. These views have translated into more modest target trims and Neutral stances, suggesting that the pace and consistency of delivery will be key for further rerating.

Bullish Takeaways

• Bullish analysts see multi year regulatory protections as underpinning a more resilient margin structure, which supports higher sustainable earnings and justifies a move toward higher equity multiples.
• Exposure to European flat rolled prices from 2026 is viewed as a key earnings growth driver, with upside to mid cycle profitability estimates if pricing remains firm.
• Successive rating upgrades and target price increases toward EUR 40 indicate growing conviction that the shares remain mispriced relative to long term cash flow potential.
• The sharp step up in some target prices from mid teens levels to the high twenties and low forties signals a reassessment of structural headwinds, tilting the risk reward profile more favorably.

Bearish Takeaways

• Bearish analysts note that despite rating upgrades, some targets remain in the high twenties, implying limited upside from current levels and constraining near term multiple expansion.
• There is caution that the anticipated benefits from regulatory support and pricing in 2026 could be slower to materialize, introducing execution risk to the medium term earnings ramp.
• More conservative valuation frameworks emphasize the cyclicality of steel demand, suggesting that peak optimism on flat rolled prices could overstate normalized earnings power.
• Neutral stances from major houses like JPMorgan highlight uncertainty around timing and magnitude of equity rerating, with investors advised to wait for clearer evidence of delivery before assigning higher multiples.

What's in the News

• Lowered 2025 earnings guidance, with Salzgitter now expecting sales slightly above EUR 9.0 billion, compared with prior guidance of EUR 9.0 billion to EUR 9.5 billion (company guidance)

Valuation Changes

• Fair Value has risen moderately from approximately €29.18 to about €34.24, bringing the new target more in line with upgraded Street expectations near €40.
• The Discount Rate has increased slightly from around 6.29 percent to roughly 6.37 percent, reflecting a modestly higher required return in the valuation framework.
• Revenue Growth has been raised from about 2.30 percent to approximately 2.51 percent, indicating a small upward adjustment to medium term top line assumptions.
• The Net Profit Margin has edged down marginally from roughly 2.47 percent to about 2.46 percent, suggesting a nearly unchanged profitability outlook despite higher growth expectations.
• The Future P/E has moved higher from around 7.83x to roughly 9.18x, indicating a somewhat larger contribution from multiple expansion in the revised valuation.