Low-Carbon Stainless Steel Expansion Will Drive Future Resilience

Key Takeaways

• Leadership in low-carbon, recycled stainless steel and partnerships for specialty products drive premium pricing and attract ESG-focused customers.
  
• Increased demand from global infrastructure and energy transition projects, plus operational efficiencies and potential EU trade measures, support sustained volume and margin growth.
  
• Ongoing weak demand, competitive imports, policy delays, volatile input costs, and trade disruptions collectively threaten profitability, volume growth, and future revenue stability.

Catalysts

Produces and sells various stainless steel products in Finland, Germany, Italy, the United Kingdom, other European countries, North America, the Asia-Pacific, and internationally.

• Outokumpu’s record high use of recycled materials (97% scrap content) and ongoing progress toward carbon-neutral operations (e.g., Kemi mine) position the company as a prime supplier of low-carbon stainless steel, making it increasingly attractive to ESG-focused customers and potentially supporting revenue growth, margin premiums, and long-term contracts as sustainability and circular economy requirements tighten globally.
  
• Strategic partnerships and the rollout of Outokumpu’s ultra-low-carbon “Circle Green” product, with strong interest from global clients (e.g., Alfa Laval), create a catalyst for expansion in premium-priced specialty products, thus enhancing average selling prices and net margins over time.
  
• Sustained global investments in infrastructure and renewable energy—sectors where stainless steel is a critical component—are expected to underpin multi-year demand growth, particularly as public and private sectors accelerate projects aligned with energy transition objectives, supporting volume growth and improved long-term earnings.
  
• Ongoing operational efficiency programs, including automation, digitalization, and plant consolidation, are on track to deliver €350 million in annualized EBITDA improvements by end-2025, directly boosting margins and overall profitability.
  
• Potential EU trade measures (e.g., “melted and poured” rules, anti-circumvention enforcement), if enacted, could reduce unfair Asian imports, alleviate pricing pressure, and allow for greater capacity utilization in core European operations, supporting revenue recovery and margin expansion.

Outokumpu Oyj Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Outokumpu Oyj's revenue will grow by 5.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.6% today to 2.7% in 3 years time.
• Analysts expect earnings to reach €194.1 million (and earnings per share of €0.43) by about July 2028, up from €-35.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €232 million in earnings, and the most bearish expecting €157 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.6x on those 2028 earnings, up from -48.7x today. This future PE is lower than the current PE for the GB Metals and Mining industry at 1028.2x.
• Analysts expect the number of shares outstanding to grow by 0.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.05%, as per the Simply Wall St company report.

Outokumpu Oyj Future Earnings Per Share Growth

Risks

• Persistent high levels of Asian imports continue to exert downward pressure on stainless steel prices in both Europe and North America, particularly in a muted demand environment—threatening future revenue growth and net margin improvements.
  
• Ongoing macroeconomic uncertainty and cautious sentiment in key markets (as indicated by manufacturing PMIs remaining below 50 in Europe and continued demand weakness in North America and Mexico) raise the risk of subdued order intake and limited volume growth, directly impacting Outokumpu’s ability to sustainably increase revenues and earnings.
  
• Pending or delayed policy measures (such as EU trade protections, infrastructure spending, or the adoption of the “melted and poured” rule) create structural uncertainty around the protection of domestic producers and the timing of demand recovery, putting at risk future revenue streams and pricing power.
  
• Exposure to volatile raw material input costs (notably energy and ferrochrome), as well as episodic events such as strikes and maintenance shutdowns, leads to unpredictable impacts on both operational performance and net profit margins, as evidenced by significant quarterly volatility.
  
• Intensifying trade and tariff disputes, complex rules around circumvention via third countries, and rising protectionism threaten to either restrict Outokumpu’s market access or raise input costs, potentially reducing future operating earnings and increasing working capital requirements.

Valuation

• The analysts have a consensus price target of €3.554 for Outokumpu Oyj based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €4.5, and the most bearish reporting a price target of just €2.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €7.1 billion, earnings will come to €194.1 million, and it would be trading on a PE ratio of 10.6x, assuming you use a discount rate of 7.0%.
• Given the current share price of €3.62, the analyst price target of €3.55 is 1.7% 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.