Upgrade from Morgan Stanley#
Morgan Stanley has changed its rating for Thyssenkrupp AG, moving it from "underweight" to "equal-weight." This adjustment comes after the company's share price fell sharply, leading to a decrease in its valuation. The new price target is set at €8.30, down from €8.70.
Share Performance and Valuation#
The stock has seen a decline of about 30% this year, underperforming its peers, including companies like ArcelorMittal and voestalpine. This drop has resulted in a modest discount of 8% to Morgan Stanley's updated valuation, which considers the company's various business segments.
Risks and Financial Outlook#
A significant risk for Thyssenkrupp is its Steel Europe division, which holds a large portion of the company's value. This division's enterprise value is €3,859 million, but after accounting for restructuring costs and other financial obligations, its implied equity value appears negative. Morgan Stanley has forecasted that the company will generate a clean adjusted EBITDA of €1.55 billion in fiscal year 2026, increasing to €1.83 billion in 2027.
Future Projections#
The brokerage anticipates that Thyssenkrupp's earnings per share will recover from €0.34 in 2026 to €1.02 in 2027. However, free cash flow is expected to be negative at €648 million for 2026. The company’s dividend is projected to remain steady at €0.15 per share during this period. Additionally, Thyssenkrupp's stake in TK Elevator is valued at €1.65 billion, with potential IPO discussions ongoing. Morgan Stanley's optimistic scenario suggests a price of €16.10 per share, while a more pessimistic view estimates a price of €4.80 per share.