Ternium: Strong Buy Based On Deep Value And Market Pessimism

Moretus Research initiates coverage of Ternium S.A. (TX) with a Strong Buy rating and a $45 price target, implying a 68% upside, based on a perceived overly bearish market view of Latin American steel cyclicality. The firm forecasts trough revenues of $16.2 billion in 2025 and $17.1 billion in 2026, below consensus estimates, citing potential risks including macro deterioration and Chinese steel export pressure; however, they view the current cycle as a deep value opportunity for long-term investors.

Analysis

Moretus Research has initiated coverage on Ternium S.A. (NYSE: TX) with a "Strong Buy" rating and a US$45 per share price target, implying a significant 68% upside from current levels. This valuation is predicated on a forward EV/Sales multiple of 0.45x applied to Moretus's 2026 revenue forecast of US$17.1 billion, which, along with their 2025 trough revenue forecast of US$16.2 billion (4% below consensus), is more conservative than market consensus. The bullish outlook, underpinned by a strongly positive general sentiment score of 0.8 and a specific ticker sentiment of 0.9 for TX, stems from Moretus's assessment that the market holds an excessively bearish view on Latin American steel cyclicality and Ternium's asset ramp-up progress. While acknowledging potential risks—including further macroeconomic deterioration, sustained pressure from Chinese steel exports, and possible delays in asset ramp-up which could postpone earnings and valuation recovery—Moretus Research views the current market phase as a rare deep value opportunity with asymmetric upside potential. This aligns with their stated focus on identifying underappreciated companies undergoing structural change or temporary dislocation where dispassionate analysis can lead to superior returns.

Key Decisions for Investors

• Investors with a long-term investment horizon should consider Ternium S.A. potentially attractive given the 'Strong Buy' rating, the substantial 68% implied upside to the US$45 price target, and the analyst's view of it as a deep value opportunity.
• Careful monitoring of macroeconomic developments in Latin America, Chinese steel export dynamics, and Ternium's execution on asset ramp-ups is warranted, as these factors represent key risks that could impact the timing and magnitude of the projected recovery.
• The valuation approach, utilizing a 0.45x forward EV/Sales multiple on below-consensus 2026 revenue forecasts, suggests that the price target incorporates a degree of conservatism, potentially offering a margin of safety for investors who believe in the eventual cyclical upturn.