Morgan Stanley has upgraded Salzgitter AG to "overweight" from "equal-weight" and boosted its price target to €70.80, up from €45.50. The brokerage said the decision reflects a brighter earnings outlook as rising European steel prices are working through forecasts, alongside a reduction in balance sheet strain following peak capital deployment on the SALCOS decarbonisation programme.
The bank's spot mark-to-market work suggests roughly 10% upside to Visible Alpha's 2027 consensus for EBITDA, even before incorporating possible benefits from European steel policy measures or a re-rating of expectations for Salzgitter's 30% stake in copper recycler Aurubis. On a spot basis, Morgan Stanley estimated group EBITDA for 2027 at €981 million, versus Visible Alpha consensus of €899 million and the brokerage's own prior forecast of €913 million.
Revised formal forecasts underpin the upgrade. Morgan Stanley raised its 2026 EBITDA projection to €729 million from €609 million, representing about a 20% uplift, and increased its 2027 EBITDA outlook by 12% to €899 million. The brokerage also lifted its 2026 earnings before tax forecast to €312 million from €150 million and raised its 2026 clean earnings per share estimate to €4.07 from €1.75.
In comparing estimates with company guidance and consensus, the report showed Morgan Stanley's 2026 EBITDA view sits above Salzgitter's guidance range of €625 million to €725 million and ahead of Visible Alpha consensus of €687 million. Separately, the report noted an earnings before tax estimate of €309 million in relation to company guidance of €200 million to €300 million and consensus of €253 million.
Morgan Stanley highlighted Salzgitter's pattern of conservative guidance: 23 of 39 profit-related pre-announcements over the past decade were positive profit warnings - roughly 60% of the total - indicating that past guidance has tended to be prudent, according to the report.
The planned full takeover of HKM is flagged as an additional source of upside. The joint venture currently produces about 4.2 million tonnes per year of crude steel; Morgan Stanley calculated that a €10 per tonne improvement at HKM would add approximately €40 million of group EBITDA, which the brokerage said is roughly equivalent to 5% of its 2028 base-case forecast.
On leverage, the bank said net debt-to-EBITDA peaked at around 3.1x in 2025 and should decline to about 1.7x by 2027 as EBITDA recovers and capital expenditure eases. Morgan Stanley expects 2027 to mark the final year of substantial cash burn from SALCOS Phase 1, with annual capital expenditure normalising toward approximately €400 million thereafter.
Valuation metrics also informed the view. Excluding the Aurubis stake, Morgan Stanley said the business trades at about 4.6x estimated 2027 EV/EBITDA, or roughly 4.2x on spot prices, compared with Salzgitter's historical average multiple of 7x.
Market reaction was immediate: Salzgitter shares were up 4.5% as of 05:05 ET (09:05 GMT) following the note.
Key considerations noted in the brokerage note
- Improving earnings outlook as European steel prices feed through to forecasts.
- Balance sheet pressure abating after peak SALCOS decarbonisation spending.
- Potential incremental value from the 30% Aurubis stake and the planned acquisition of HKM.
What Morgan Stanley quantified
- Spot-based 2027 group EBITDA estimate: €981 million (Visible Alpha consensus: €899 million; Morgan Stanley prior forecast: €913 million).
- Upgraded 2026 EBITDA to €729 million from €609 million; 2027 EBITDA increased to €899 million (up 12%).
- 2026 earnings before tax uplifted to €312 million from €150 million; 2026 clean EPS to €4.07 from €1.75.
- Net debt-to-EBITDA: peak ~3.1x in 2025, projected ~1.7x by 2027. Annual capex normalising toward ~€400 million after 2027.
Investor implications
The brokerage's upgrade is driven by a combination of higher short-term steel prices, a clearer path to reduced leverage as SALCOS spending eases, and identifiable upside levers from the Aurubis stake and the HKM consolidation. The valuation gap versus historical multiples is a central part of Morgan Stanley's constructive stance.