Morgan Stanley has moved thyssenkrupp AG to an "equal-weight" rating from "underweight" while trimming its price target to €8.30 from €8.70. The change follows a pronounced year-to-date sell-off that removed the German industrial group's prior premium to Morgan Stanley's sum-of-the-parts valuation.
The brokerage notes that thyssenkrupp's shares have lagged industry peers by roughly 30% so far this year when compared on a narrow EV/NTM EBITDA metric. That underperformance is the largest among a peer set that includes ArcelorMittal, voestalpine, Salzgitter and SSAB.
"The recent de-rating has moved the shares to a modest 8% discount to our updated base case sum-of-the-parts," Morgan Stanley said, adding that the current valuation provides a more balanced risk-reward profile. The bank's updated framework allocates a 5.8x EV/EBITDA multiple to Steel Europe, producing an enterprise value for that unit of €3,859 million and making it the single largest component of group value at roughly 27%.
After factoring in identified liabilities and required investments, Steel Europe becomes a drag on the division's implied equity value. Morgan Stanley applies restructuring costs of €600 million, pension allocations of €2.60 billion and remaining decarbonisation capital expenditure of €2.07 billion. With those adjustments the division's implied equity value is negative €2.07 billion, which translates to negative €3.30 per share.
Management has said discussions with Jindal Steel International remain ongoing, but Morgan Stanley cautions that "recent external comments have heightened investor concerns around timing and execution of a potential transaction." The brokerage therefore treats transaction timing and execution risk as a material uncertainty for the group.
On the operational forecasts, Morgan Stanley projects group clean adjusted EBITDA of €1.55 billion in fiscal year 2026, rising to €1.83 billion in fiscal year 2027. Clean basic earnings per share are modeled at €0.34 for fiscal 2026 and are expected to recover to €1.02 in fiscal 2027. Free cash flow to equity is forecast at negative €648 million in fiscal 2026. Morgan Stanley holds the dividend per share steady at €0.15 across its forecast horizon.
In the brokerage's valuation framework, thyssenkrupp's roughly 16% retained stake in TK Elevator is valued at €1.65 billion. Morgan Stanley's note refers to press reports indicating TK Elevator's owners are seeking a valuation of up to €25 billion including debt, with an initial public offering being considered as an alternative outcome.
The bank outlines a range of outcomes for thyssenkrupp. A bull case of €16.10 per share assumes a super-cycle in Steel Europe profitability and an eventual divestment of that division. Conversely, a bear case of €4.80 per share assumes that recurring restructuring costs double and that no profit improvement occurs in fiscal years 2027 or 2028 relative to 2026.
The note also reiterates the adjusted targets and sensitivities that underlie Morgan Stanley's stance. While the upgrade to equal-weight signals reduced near-term downside in the brokerage's view, the firm continues to highlight Steel Europe fundamentals and the execution and timing of any strategic transaction as the principal variables driving valuation outcomes.
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