I've been frustrated with the slow progress of Ternium (TX) as a long idea, as although the shares have done a little better lately compared to other North American and South American steel companies, I still see the shares at a low valuation relative to a troughing business. That's not entirely unfair, I'll grant, as Mexico's economy has deteriorated noticeably, and major Latin American markets like Argentina and Colombia have shut down to combat COVID-19.
The biggest near-term challenge for Ternium, apart from the risk of even more deterioration in Mexico and/or a weaker recovery in autos, is likely its exposure to flat steel. Long steel has generally been outperforming (a theme with Gerdau (GGB) and Nucor (NUE)), and Ternium has little of that - not that I think it would actually matter all that much given the state of Mexico's non-resi construction market.
I continue to believe Ternium shares are trading too cheaply. Between discounted cash flow, EV/EBITDA, and ROE-driven P/BV, I believe Ternium should trade at least in the low $20s, and I'd note that the low leverage ratio (relative to other steel companies, at least) does reduce some of the risk from a protracted downturn.
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