Decarbonization And Circular Economy Will Support Global Demand

Key Takeaways

• Aperam's unique supply chain integration, recycling focus, and regional leadership position it to outpace industry growth, capture market share, and sustain premium pricing as demand shifts to green materials.
  
• Strategic moves in specialty and defense alloys, as well as regulatory advantages in low-carbon steel, are set to drive transformative changes in revenue mix and profit margins.
  
• Weak core European operations, rising competition, regulatory pressures, and overreliance on select regions threaten long-term profitability and earnings stability.

Catalysts

Produces and sells stainless steel and alloy products worldwide.

• Analyst consensus sees German infrastructure spending and European construction recovery as a moderate tailwind, but this underestimates the potential for a sustained multi-year surge in stainless steel demand from a holistic economic rebound, which could meaningfully expand Aperam's revenues and operating leverage beyond current forecasts, especially as Aperam is Germany's closest and largest supplier.
  
• While consensus sees Universal Stainless delivering "synergies," a much more bullish view is justified: Aperam is only at the start of unlocking a platform for globally scaled, high-margin aerospace and defense solutions, with knowledge transfer into European operations and cross-continental customer relationships catalyzing a step-change in net margin and specialty revenue mix, more than doubling prior synergy estimates.
  
• Aperam's leadership in recycled stainless and specialty alloys is poised to capture substantial new market share as global policies accelerate the shift to circular materials in autos, hydrogen, batteries, and green infrastructure, strongly outpacing sector growth and driving both sustainable top-line expansion and premium pricing power.
  
• Aperam's vertical integration, especially in Brazil with its self-supplied manganese and multi-product hot rolling mill, uniquely positions it to not just withstand but out-compete during raw material volatility, which de-risks EBITDA and supports structurally higher margins as rivals struggle with cost pressures.
  
• The introduction and enforcement of EU "melt and pour" origin rules, combined with tightening global carbon border taxes, will strongly favor domestic and low-carbon producers like Aperam, enabling market share gains and the ability to command a premium for certified green steel, amplifying both earnings quality and resilience through the cycle.

Aperam Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Aperam compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Aperam's revenue will grow by 11.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.7% today to 5.0% in 3 years time.
• The bullish analysts expect earnings to reach €429.3 million (and earnings per share of €5.94) by about July 2028, up from €232.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 7.6x on those 2028 earnings, down from 8.8x today. This future PE is lower than the current PE for the GB Metals and Mining industry at 15.3x.
• 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 6.93%, as per the Simply Wall St company report.

Aperam Future Earnings Per Share Growth

Risks

• Aperam faces ongoing weakness and unpredictability in its core European stainless steel operations, with management repeatedly emphasizing low profitability and the absence of a clear recovery timeline, which threatens to drag on group revenues and earnings.
  
• Heightened competition and overcapacity, especially from lower-cost producers in China and Indonesia, continue to exert downward pressure on stainless steel prices and margins in Europe, increasing the risk of further market share losses and eroding long-term profitability.
  
• The shift toward stricter environmental regulations and global decarbonization is expected to increase compliance and operational costs, while Aperam's relatively slow pivot to green steel versus peers could cause the company to lose ESG-sensitive customers, both of which may compress its net margins over time.
  
• Volatility in raw material and scrap prices, particularly in the nickel and stainless scrap markets, adds unpredictability to Aperam's cost base; with management flagging persistently low raw material prices and lagging input cost recovery, there is a risk of ongoing margin pressure.
  
• Persistent reliance on the Brazilian business and a small number of robust segments to generate positive results highlights the risk that downturns in these regions-amid global trade policy uncertainty and slowing end-market demand for traditional stainless steel-could significantly impact consolidated earnings and cash flows.

Valuation

• The assumed bullish price target for Aperam is €37.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Aperam's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €37.0, and the most bearish reporting a price target of just €25.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €8.6 billion, earnings will come to €429.3 million, and it would be trading on a PE ratio of 7.6x, assuming you use a discount rate of 6.9%.
• Given the current share price of €28.32, the bullish analyst price target of €37.0 is 23.5% higher.
• 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.