Materials| Industrials |Commodities

Rahul Jain

Equity Bottom-Up

<ul>
<li>EBITDA loss of $174M, net loss of $483M, driven by weak auto demand, high costs, and continuing drag from AMNS slab contract; EBITDA/ton fell sharply to –$42.</li>
<li>Idling six facilities, exiting loss-making operations, $300M cost savings targeted in H2; slab contract expiry to add ~$500M EBITDA annually from 2026.</li>
<li>Deep value: Trading at 4.4x EV/EBITDA (2026E), 7.1x P/E, 0.55x P/B, and $653 EV/ton of full steelmaking capacity, reflecting deep cyclical pessimism.</li>
</ul>


EBITDA loss of $174M, net loss of $483M, driven by weak auto demand, high costs, and continuing drag from AMNS slab contract; EBITDA/ton fell sharply to –$42.
Idling six facilities, exiting loss-making operations, $300M cost savings targeted in H2; slab contract expiry to add ~$500M EBITDA annually from 2026.
Deep value: Trading at 4.4x EV/EBITDA (2026E), 7.1x P/E, 0.55x P/B, and $653 EV/ton of full steelmaking capacity, reflecting deep cyclical pessimism.


Cleveland-Cliffs: Weak Q1 Results, Restructuring Underway, Valuations Reflect Deep Discount

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

<ul><li>Cleveland-Cliffs Inc.'s earnings for the fourth quarter and full year 2024 highlighted several critical facets of the company's recent performance and its outlook.</li><li>The call began with the acknowledgment of substantial challenges faced during 2024, primarily driven by weak demand from key sectors, including automotive and construction, which resulted in the idling of the C6 blast furnace at the Cleveland Works plant.</li><li>The impact of persistently high interest rates and ongoing trade distortions due to overproduction and unfair competition from foreign steel producers also played a significant role in shaping Cleveland-Cliffs' challenging year.</li></ul>

Cleveland-Cliffs Inc.'s earnings for the fourth quarter and full year 2024 highlighted several critical facets of the company's recent performance and its outlook.The call began with the acknowledgment of substantial challenges faced during 2024, primarily driven by weak demand from key sectors, including automotive and construction, which resulted in the idling of the C6 blast furnace at the Cleveland Works plant.The impact of persistently high interest rates and ongoing trade distortions due to overproduction and unfair competition from foreign steel producers also played a significant role in shaping Cleveland-Cliffs' challenging year.

Cleveland-Cliffs: Ramping Up Automotive Sector Engagement To Catalyze Top-Line Growth!

<ul><li>Cleveland-Cliffs presented its third-quarter 2024 results during a challenging period of weaker steel demand and pricing, largely attributed to reduced automotive production and high interest rates affecting consumer decisions.</li><li>The company's acquisition of Stelco, a Canadian steelmaker, was a notable development during this period, promising operational agility and cost efficiency.Cleveland-Cliffs reported a quarterly adjusted EBITDA of $124 million on 3.8 million tons of shipments.</li><li>This was a decline from previous performance levels, which the company attributed to reduced activity in the automotive industry.</li></ul>

Cleveland-Cliffs presented its third-quarter 2024 results during a challenging period of weaker steel demand and pricing, largely attributed to reduced automotive production and high interest rates affecting consumer decisions.The company's acquisition of Stelco, a Canadian steelmaker, was a notable development during this period, promising operational agility and cost efficiency.Cleveland-Cliffs reported a quarterly adjusted EBITDA of $124 million on 3.8 million tons of shipments.This was a decline from previous performance levels, which the company attributed to reduced activity in the automotive industry.

Cleveland-Cliffs Inc.: Can The Stelco Acquisition Be A Game Changer?  - Major Drivers

<ul><li>Cleveland-Cliffs Inc. reported solid second-quarter 2024 financial results, crediting its encouraging performance mainly to robust cash flow generation that has been bolstered by increased shipments, sustained cost-reduction initiatives, and successful inventory level management.</li><li>The company’s substantial reduction of its net debt balance to $3.4 billion, achieved by applying 65% of the quarter's $362 million in free cash flow towards debt reduction, was a highlight of the period.</li><li>Baptista Research looks to evaluate the different factors that could influence the company's price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.</li></ul>

Cleveland-Cliffs Inc. reported solid second-quarter 2024 financial results, crediting its encouraging performance mainly to robust cash flow generation that has been bolstered by increased shipments, sustained cost-reduction initiatives, and successful inventory level management.The company’s substantial reduction of its net debt balance to $3.4 billion, achieved by applying 65% of the quarter's $362 million in free cash flow towards debt reduction, was a highlight of the period.Baptista Research looks to evaluate the different factors that could influence the company's price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Cleveland-Cliffs Inc.: Will The Stelco Acquisition Be A Game Changer? - Major Drivers

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Commodities

<ul>
<li>Following our initiation on <a href="https://www.smartkarma.com/entities/mount-gibson-iron-ltd" target="_blank" data-smartkarma-citation="entities:19043:1" rel="noopener">Mount Gibson Iron (MGX AU)</a> and <a href="https://www.smartkarma.com/entities/kumba-iron-ore-ltd" target="_blank" data-smartkarma-citation="entities:25094:1" rel="noopener">Kumba Iron Ore (KIO SJ)</a>, recently we initiate coverage on <a href="https://www.smartkarma.com/entities/champion-iron-ltd" target="_blank" data-smartkarma-citation="entities:19734:1" rel="noopener">Champion Iron (CIA AU)</a>, a pure play with Canadian assets.</li>
<li>Although it is more richly priced than the other two names, it offers a 50% volume expansion opportunity in FY25/26, subject to financing availability. </li>
<li>Trading at 8.6x FY25 (March-end) PE, 4.6x EV-EBITDA, and a 6% dividend yield (subject to capex), this is not our favorite name at the current price due to production uncertainty. </li>
</ul>


Following our initiation on Mount Gibson Iron (MGX AU) and Kumba Iron Ore (KIO SJ), recently we initiate coverage on Champion Iron (CIA AU), a pure play with Canadian assets.
Although it is more richly priced than the other two names, it offers a 50% volume expansion opportunity in FY25/26, subject to financing availability. 
Trading at 8.6x FY25 (March-end) PE, 4.6x EV-EBITDA, and a 6% dividend yield (subject to capex), this is not our favorite name at the current price due to production uncertainty. 


Champion Iron (CIA CN): Another Expansion Iron Ore Pure Play on High-Grade Ore

United States

Cleveland-Cliffs Inc. is an American iron ore mining company. The Company supplies iron ore pellets, lumps and fines to blast furnaces in the global steel industry. Cliffs is in the process of expanding its customer base to Electric Arc Furnaces.

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Cleveland-Cliffs Inc (CLF US)

Cleveland-Cliffs: Weak Q1 Results, Restructuring Underway, Valuations Reflect Deep Discount

Cleveland-Cliffs’ 27% rally today is justified as the stock was deeply oversold. The company expects major orders from U.S. automakers and stands...

Rahul Jain

Cleveland-Cliffs: Ramping Up Automotive Sector Engagement To Catalyze Top-Line Growth!

Cleveland-Cliffs Inc.'s earnings for the fourth quarter and full year 2024 highlighted several critical facets of the company's recent performance...

Baptista Research

Cleveland-Cliffs Inc.: Can The Stelco Acquisition Be A Game Changer? - Major Drivers

Cleveland-Cliffs presented its third-quarter 2024 results during a challenging period of weaker steel demand and pricing, largely attributed to...

Baptista Research

Cleveland-Cliffs Inc.: Will The Stelco Acquisition Be A Game Changer? - Major Drivers

Cleveland-Cliffs Inc. reported solid second-quarter 2024 financial results, crediting its encouraging performance mainly to robust cash flow...

Baptista Research

Champion Iron (CIA CN): Another Expansion Iron Ore Pure Play on High-Grade Ore

We further expand our coverage in iron ore names by initiating on Champion Iron (CIA AU). With exposure to high-grade Fe ore at 65%, this could be...

Sameer Taneja

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