On Thursday, JPMorgan upgraded SSAB AB (SSABA:SS) (OTC: SSAAY), a leading steel manufacturer with a market capitalization of $6.24 billion, from Neutral to Overweight and raised the price target from SEK58.00 to SEK77.00. The revision reflects the firm’s positive outlook on the company’s earnings potential, particularly in the United States where SSAB is expected to derive approximately 40% of its anticipated 2025 EBITDA. According to InvestingPro data, the company currently trades at an attractive P/E ratio of 10.17 and has demonstrated strong profitability with a last twelve months EBITDA of $1.09 billion.
SSAB’s investment in its fossil-free Lulea mini-mill is expected to impact the company’s balance sheet, potentially leading to a free cash flow negative position in the medium term. Supporting JPMorgan’s view, InvestingPro analysis shows that SSAB maintains robust financial health with a current ratio of 2.71 and holds more cash than debt on its balance sheet. This strong liquidity position should provide adequate financial cushion during this investment period. InvestingPro subscribers have access to 8 additional key financial insights about SSAB’s financial position.
The company’s exposure to the US infrastructure sector, especially its plate segment, is a key factor in the rating upgrade. SSAB is highly sensitive to US plate prices, and JPMorgan analysts predict near-term upside risks to these prices. This could lead to positive earnings revisions for SSAB in the short term.
In the long term, the demand for steel plate is anticipated to stay robust due to its use in high-margin end segments. These segments include green infrastructure projects like wind energy, renewable energy solutions, and defense applications. The firm’s analysts believe that these factors will support plate prices and contribute to SSAB’s strong performance.
JPMorgan’s positive stance on SSAB is also influenced by the strategic moves the company is making towards sustainable steel production. The Lulea mini-mill investment aligns with global trends towards reducing carbon emissions and could position SSAB favorably in the market as industries increasingly seek environmentally friendly materials.
In other recent news, SSAB AB has received an upgraded stock rating from Jefferies. Analyst Cole Hathorn raised the rating from Hold to Buy and increased the price target from SEK57.00 to SEK64.00. The upgrade is based on expectations that the fiscal year 2024 results will mark the end of EBITDA downgrades. Hathorn cited recent price increases in the US plate market as a positive factor for SSAB. The analyst also mentioned that the market has now absorbed concerns over capital expenditures and free cash flow, which had previously affected the company’s stock performance. Updated project disclosures have provided additional reassurance to investors. SSAB is noted for its attractive dividend yield, and the revised financial strategies have contributed to the improved outlook. These developments have led to a more optimistic view of SSAB’s financial performance.
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