Global Materials | Industrials | Commodities

Rahul Jain

Equity Bottom-Up

Nippon Steel Corporation / Equity Bottom-Up

<ul>
<li>Nippon Steel targets over 100 Mt capacity by 2030, focusing on global growth as Japan’s domestic demand shrinks.</li>
<li>It plans to acquire U.S. Steel for $14.9B and expand in India via AMNS joint ventures.</li>
<li>FY24 profit rose 36%, but export reliance, ESG lag, and U.S. deal hurdles pose risks.</li>
</ul>


Nippon Steel targets over 100 Mt capacity by 2030, focusing on global growth as Japan’s domestic demand shrinks.
It plans to acquire U.S. Steel for $14.9B and expand in India via AMNS joint ventures.
FY24 profit rose 36%, but export reliance, ESG lag, and U.S. deal hurdles pose risks.


Nippon Steel (5401 JP): Navigating Decline at Home, Expanding Abroad

<ul>
<li>Q1 showed resilient performance; Q2 EBITDA to rise on European spread recovery, healthy orders, and stable North America.</li>
<li>Over 60% of future capex targets India; Hazira and Visakhapatnam expansions drive sharp volume and margin growth.</li>
<li>Stock trades at deep 60–70% discount to Indian steelmakers despite growing India focus and structurally stronger EBITDA.</li>
</ul>


Q1 showed resilient performance; Q2 EBITDA to rise on European spread recovery, healthy orders, and stable North America.
Over 60% of future capex targets India; Hazira and Visakhapatnam expansions drive sharp volume and margin growth.
Stock trades at deep 60–70% discount to Indian steelmakers despite growing India focus and structurally stronger EBITDA.


ArcelorMittal: Strengthening Core, Pivoting to Growth

<ul>
<li>JSW Steel has grown its domestic steelmaking capacity at CAGR of 14% over the last 2 decades (2x industry) and at 25% lower costs</li>
<li>Gradual capacity ramp-up at recently completed expansion at Vijayanagar (5m) and actively pursuing 10-15mt of new capacity additions over the next 3-5 years</li>
<li>Valuations: JSW Steel trades at premium to its 5yr average EV/EBITDA likely due to a) impending imposition of a 12% safeguard duty b) superior capital allocation etc.</li>
</ul>


JSW Steel has grown its domestic steelmaking capacity at CAGR of 14% over the last 2 decades (2x industry) and at 25% lower costs
Gradual capacity ramp-up at recently completed expansion at Vijayanagar (5m) and actively pursuing 10-15mt of new capacity additions over the next 3-5 years
Valuations: JSW Steel trades at premium to its 5yr average EV/EBITDA likely due to a) impending imposition of a 12% safeguard duty b) superior capital allocation etc.


JSW Steel: Low Cost Capacity Expansion Underpin Premium Valuations

<ul>
<li>NMDC has aggressive growth plans to double its output over the next 5-6 years. Near-term guidance is also strong with plans to grow at &gt;10% in FY26.</li>
<li>New levies, delays in execution and lacklustre pricing outlook remain a key concern. However, well-aligned to surging demand from steadily growing domestic steel industry.</li>
<li>Valuations: Trades at 9x TTM PE which is a slight premium to 5 yr average. Stock offers about 4-5% dividend yield and has payout ratio of &gt;30% provides downside support. </li>
</ul>


NMDC has aggressive growth plans to double its output over the next 5-6 years. Near-term guidance is also strong with plans to grow at &gt;10% in FY26.
New levies, delays in execution and lacklustre pricing outlook remain a key concern. However, well-aligned to surging demand from steadily growing domestic steel industry.
Valuations: Trades at 9x TTM PE which is a slight premium to 5 yr average. Stock offers about 4-5% dividend yield and has payout ratio of &gt;30% provides downside support. 


NMDC: Proxy to Rising Steel Demand with a High Dividend Yield.

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Recent developments have continued to reinforce our bullish outlook on global equities (MSCI ACWI).</li>
<li>There is no reason to fight this bullish trend, and we continue to expect more upside into the early part of 2024.</li>
<li>Upgrading Mexico to Overweight; Technology Remains Global Leadership; Actionable Themes: 44 individual stock buy recommendations within Technology, Services, Consumer Discretionary, Financials, and Materials</li>
</ul>


Recent developments have continued to reinforce our bullish outlook on global equities (MSCI ACWI).
There is no reason to fight this bullish trend, and we continue to expect more upside into the early part of 2024.
Upgrading Mexico to Overweight; Technology Remains Global Leadership; Actionable Themes: 44 individual stock buy recommendations within Technology, Services, Consumer Discretionary, Financials, and Materials


Upgrading Mexico to Overweight; Technology Remains Global Leadership; Overall Bullish Outlook Intact

United States

ArcelorMittal produces steel. The Company manufactures cold rolled, electrogalvanized and coated steels, slabs, bars, and wire rods. ArcelorMittal serves customers worldwide.

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ArcelorMittal (MT US)

Nippon Steel (5401 JP): Navigating Decline at Home, Expanding Abroad

Nippon Steel aims for global growth with plans to expand capacity, acquire U.S. Steel, and focus on India joint ventures, despite risks of export...

Rahul Jain

ArcelorMittal: Strengthening Core, Pivoting to Growth

Positive Q1 performance sets stage for Q2 EBITDA growth driven by European spread recovery, healthy orders, and India-focused capex targets. Stock...

Rahul Jain

JSW Steel: Low Cost Capacity Expansion Underpin Premium Valuations

JSW Steel has significantly increased its steelmaking capacity in India, with plans for further expansion in the next few years, leading to...

Rahul Jain

NMDC: Proxy to Rising Steel Demand with a High Dividend Yield.

NMDC aims to double output in 5-6 years, with strong near-term growth plans despite concerns over levies and pricing. Stock trades at slight...

Rahul Jain

Upgrading Mexico to Overweight; Technology Remains Global Leadership; Overall Bullish Outlook Intact

Upgrading Mexico $EWW to Overweight; Bullish Outlook Intact on $ACWI; Technology Remains Global Leadership. 44 individual buys highlighted in Tech,...

Vermilion Research

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Nippon Steel (5401 JP): Navigating Decline at Home, Expanding Abroad

​Nippon Steel aims for global growth with plans to expand capacity, acquire U.S. Steel, and focus on India joint ventures, despite risks of export...

Rahul Jain

ArcelorMittal: Strengthening Core, Pivoting to Growth

​Positive Q1 performance sets stage for Q2 EBITDA growth driven by European spread recovery, healthy orders, and India-focused capex targets. Stock...

Rahul Jain

JSW Steel: Low Cost Capacity Expansion Underpin Premium Valuations

​JSW Steel has significantly increased its steelmaking capacity in India, with plans for further expansion in the next few years, leading to...

Rahul Jain

NMDC: Proxy to Rising Steel Demand with a High Dividend Yield.

​NMDC aims to double output in 5-6 years, with strong near-term growth plans despite concerns over levies and pricing. Stock trades at slight...

Rahul Jain

Upgrading Mexico to Overweight; Technology Remains Global Leadership; Overall Bullish Outlook Intact

Upgrading Mexico $EWW to Overweight; Bullish Outlook Intact on $ACWI; Technology Remains Global Leadership. 44 individual buys highlighted in Tech,...

Vermilion Research

Nippon Steel aims for global growth with plans to expand capacity, acquire U.S. Steel, and focus on India joint ventures, despite risks of export...

Positive Q1 performance sets stage for Q2 EBITDA growth driven by European spread recovery, healthy orders, and India-focused capex targets. Stock...

JSW Steel has significantly increased its steelmaking capacity in India, with plans for further expansion in the next few years, leading to...

NMDC aims to double output in 5-6 years, with strong near-term growth plans despite concerns over levies and pricing. Stock trades at slight...