We initiate on TX with a Strong Buy rating and $45 PT. Ternium S.A. is Latin America’s leading steel and mining platform, manufacturing and distributing steel products across twelve countries across construction, automotive, energy, and other industrial end-markets.
Our investment thesis is underpinned by three main arguments:
(1) We think the market is mispricing a deeper, longer revenue trough with our 2025E revenue forecast of 16.2bn US$, four percent below consensus on both Mexican and Brazilian demand weakness and regional steel spreads compression. Management is guiding volume flat to down and only double-digit EBITDA margins, not growth.
(2) Although the volume headwinds in the short term and the asset ramp-up in the longer term limit a more secular growth story, in our view the 0.27x EV/Sales is embedding extreme pessimism. Even assuming a rather conservative mean reversion to our 0.38x–0.45x 2026E forward multiples is justified given Ternium’s product mix, geographic diversification, and supply chain execution.
(3) Our $45 PT implies 68% upside and is justified by multiple expansion and cash generation as incremental capacity and US infra spending gradually support recovery.
We flag that a further macro deterioration or a prolonged Chinese export pressure could depress regional steel pricing and delay earnings recovery that we factor in our below consensus revenue and conservative multiple assumptions.
Verdict: near-term pessimism providing a good entry point and disciplined scenarios on the risk as an asymmetric R/R for value long-term investors.