Morgans initiates coverage on A&NZ steel distributor and value-added processor Vulcan Steel with an Add rating in the belief the business is at a cyclical low point in earnings.

Manufacturer BlueScope steel ((BSL)) has a greater capital intensity [a return on invested capital (ROIC) of 14.6%] compared to Vulcan with a ROIC of 21.3%, notes the broker.

Vulcan Steel has 70 logistics and processing facilities throughout A&NZ and the business is split between steel and metals.

The Steel division includes processing and distribution of steel beams, plates and coil, while Metals includes stainless steel, engineering steel and aluminium products.

Morgans begins by setting a $9 target.

Sector: No Sector.

Target price is $9.00.Current Price is $7.45. Difference: $1.55 - (brackets indicate current price is over target). If VSL meets the Morgans target it will return approximately 17% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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