A significant underperformance in the year-to-date period has prompted a notable shift in perspective from analysts at US investment bank Morgan Stanley regarding the Essen-based industrial conglomerate. The firm has upgraded its rating on the stock, a move made despite the company’s core operations remaining deep in negative territory due to substantial restructuring charges. A closer examination of the corporate segments reveals the rationale behind this revised valuation model.
Valuation Adjustments Following Share Price Decline
On Tuesday, Morgan Stanley raised its assessment of Thyssenkrupp from “Underweight” to “Equal Weight.” Concurrently, it made a slight downward adjustment to its price target, trimming it from €8.70 to €8.30. This seemingly contradictory action stems directly from the stock’s weak trajectory in recent months. Having declined by approximately 15% since the start of the year, the shares have notably underperformed competitors such as ArcelorMittal and Salzgitter.
Trading around €8.17, the analysts now consider the valuation discount to be moderate. They argue the risk-reward profile appears more balanced, as the negative factors associated with the ongoing corporate transformation are largely reflected in the current share price. In an extreme bullish scenario—assuming an industry supercycle and a complete exit from the steel business—the brokerage even suggests a potential valuation of €16.10 per share.
Operational Performance: A Mixed Picture
The company’s recent financial results present a dichotomy. In the first fiscal quarter, group revenue fell by 8% to €7.2 billion, pressured by both pricing and demand. However, the APEX efficiency program took effect, driving a 10% increase in adjusted EBIT to €211 million. The bottom line nonetheless showed a net loss of €334 million, primarily attributable to massive restructuring costs of €401 million within the troubled Steel Europe division.
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In contrast, the defense subsidiary TKMS (Thyssenkrupp Marine Systems) serves as a reliable stabilizer. With an order backlog of €18.7 billion and a gross margin of 17%, the submarine manufacturer provides crucial operational momentum. This position is further strengthened by plans to establish a service center in Singapore and new federal defense contracts for frigates. Expectations for the hydrogen subsidiary Nucera, however, are being tempered by unexpectedly high costs for module optimizations and a halted project in the United States.
Strategic Milestones on the Horizon
Beyond the steel division, the group’s Materials Services trading arm is under close scrutiny. This segment must demonstrate an improved performance in the current quarter to pave the way for a planned independence move scheduled for autumn 2026.
The calendar for the coming weeks is set to provide concrete answers on several key strategic fronts:
* May 12: Release of the half-year report, including an update on negotiation status with the Jindal Group.
* May 12: A strategic decision regarding the future of Materials Services.
* June 1: The planned transfer of HKM shares to Salzgitter.
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