Ternium Argentina SA (TXAR.BA) fair value

ACCE thesis

Ternium Argentina makes flat-rolled steel, including hot-rolled and cold-rolled coil and coated sheet, for the Argentine construction, auto and appliance markets, out of its Ensenada and San Nicolás integrated mills. Its advantage is that it is the largest integrated steelmaker in the country, which gives it control over its own iron and slab supply in a market where imports are a constant threat. Revenue grew 25.6%, but operating margin is only 3.5% and gross margin 15.4%, so the top-line recovery has not yet reached the bottom line, and ROE of 5.9% shows little return on the capital base. At 8.1 times trailing earnings and 10.6 times forward, the market is pricing in either a sustained margin recovery or a sharp fall in the Argentine cyclical risk premium, and the thesis rests on which of those arrives first. The score of 73/100 and absence from any major index mean the name is under-followed, so a deeper look should focus on margin trajectory per tonne shipped and the tariff and import-quota regime.