Berenberg Starts Ternium S.A. (TX) at Buy
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Berenberg initiates coverage on Ternium S.A. (NYSE: TX) with a Buy rating and a price target of $28.50, saying its exposure to Mexico is more of an opportunity than risk.
Analyst Alessandro Abate commented, "We initiate coverage of Ternium with a Buy recommendation and a price target of USD28.50. Our valuation is based on a 4.5x EV/EBITDA multiple on our 2017E EBITDA. The recent pullback of the stock due to a perceived negative effect on the Mexican economy from potentially more stringent US protectionist measures is overstated, in our view. Ternium’s leadership in the fast-growing premium markets (Mexican automotive and white goods), just as the Mexican peso depreciates, is a further catalyst for our positive stance on the stock. The company benefits from a stable FCF which is very supportive for both shareholder returns and investments into value-added products that remain key for solid margins in the long term. The potential M&A upside increases the appeal of the stock, adding support to valuation if a joint venture with thyssenkrupp CSA/Brazil materialises. We would not exclude the possibility of a revaluation of the Usiminas stake if the economic outlook in Brazil improves."
Shares of Ternium S.A. closed at $24.15 yesterday.
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