On Friday, Citi updated its price target for ArcelorMittal (NYSE:MT:NA) (NYSE: MT), increasing it to EUR40.00 from the previous EUR38.00. The firm has maintained its Buy rating on the steel manufacturer's stock. Citi's analysis highlights the growth potential of the Indian steel market, where ArcelorMittal is currently positioned as the fourth largest flat steel producer.
The steel giant is expected to see its volumes grow by an annual rate of 11% leading up to the year 2040, outpacing the Indian market's growth forecast of 7%. This growth trajectory positions ArcelorMittal as a significant player in the region.
By 2030, the Indian operations are projected to contribute more than 30% to the group's EBITDA, a substantial increase from the current figure of around 6%.
Citi's analyst pointed out that Indian steel companies are trading at more than double the valuation multiple compared to ArcelorMittal, with a 7.5x 1-year forward EV/EBITDA. This observation underscores the value proposition and growth prospects of ArcelorMittal's Indian business segment.
The analyst also noted the historical trend where the market value growth of listed Indian subsidiaries has often represented a large portion of the market capitalization appreciation for many global multinationals. This trend bodes well for ArcelorMittal as it continues to expand and capitalize on the opportunities within the Indian steel market.
In other recent news, ArcelorMittal experienced a significant shift in earnings, with North America now surpassing Europe as the company's largest source of EBITDA, accounting for about 28%.
This development prompted BofA Securities to upgrade ArcelorMittal stock from Neutral to Buy, citing the company's strategic capital expenditures outside Europe. The steel manufacturing company reported a resilient Q3 performance, maintaining a robust EBITDA margin of $118 per ton, significantly contributed by North America and Brazil.
ArcelorMittal's strategic growth projects are expected to add $1.8 billion to the EBITDA, with $1 billion anticipated in the next two years. The company also returned significant value to shareholders, repurchasing $280 million of stock in Q3, reducing the share count by 6% in 2024.
Furthermore, ArcelorMittal reaffirmed its commitment to a $10 billion decarbonization target by 2030 and plans to return at least 50% of its free cash flow to shareholders while maintaining low net debt. These are among the recent developments for ArcelorMittal.
InvestingPro Insights
ArcelorMittal's strategic positioning in the Indian steel market, as highlighted by Citi's analysis, is further supported by recent InvestingPro data and tips. The company's Price to Book ratio of 0.37, as reported by InvestingPro, suggests that the stock may be undervalued relative to its assets, aligning with Citi's observation about the potential for growth in market value.
InvestingPro Tips indicate that ArcelorMittal has been aggressively buying back shares and has raised its dividend for 4 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy given the company's current dividend yield of 1.74% and a strong dividend growth of 13.64% over the last twelve months.
Despite recent challenges, including a revenue decline of 11.8% in the last twelve months, InvestingPro data shows that analysts expect ArcelorMittal to be profitable this year. This projection, combined with the company's low price-to-book multiple, suggests potential for value creation as the company expands its Indian operations.
For investors seeking a deeper understanding of ArcelorMittal's prospects, InvestingPro offers 13 additional tips, providing a comprehensive view of the company's financial health and market position.
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