Jefferies Initiates Danieli with 'Buy' Rating on Green Steel Opportunity

Jefferies initiated coverage of Italian steelmaking equipment supplier Danieli & C Officine Meccaniche with a “buy” rating and a €75 price target on Wednesday, arguing the company is undervalued given its strategic position in the transition to low-carbon steel production. The positive outlook sent Danieli's shares up over 4% in trading.

The Decarbonization Thesis

According to the Jefferies note, Danieli is poised to benefit from significant capital expenditure in the European steel sector as it moves to reduce carbon emissions. The analysts estimate that Europe will require 40 million to 50 million tonnes of new low-carbon steel capacity by 2030.

Danieli is one of only three companies globally capable of providing fully integrated solutions for modern steelmaking. Its offerings include direct reduction plants, electric arc furnaces, casting, and rolling equipment, which are all critical technologies for producing so-called green steel.

Valuation Discount

Jefferies highlighted a stark valuation gap between Danieli and its peers. The company trades at an estimated 3.2 times its fiscal 2027 enterprise value to EBITDA (EV/EBITDA), compared to a blended average of 11.2 times for comparable technology companies.

The investment bank attributed this discount primarily to structural factors, including:

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• A low free float of approximately 20%
• A dual-class share structure
• Concentrated family ownership

To arrive at its €75 price target, Jefferies valued Danieli's divisions separately and applied a 15% liquidity discount to its estimated equity value of approximately €90 per share.

Financial Strength and Growth Drivers

Jefferies noted that Danieli's execution and financing risks are mitigated by a strong financial position, which includes an order backlog of roughly €6 billion and more than €2 billion in net cash. The company's business model, which involves customer advance payments, results in deeply negative working capital and supports strong free cash flow.

Beyond Europe, which accounts for 27% of revenue, Jefferies identified additional growth catalysts. These include manufacturing reshoring in the U.S., investment in direct-reduction technology across the Middle East and North Africa, and major steel capacity expansion in India.