JPMorgan Assumes GrafTech (EAF) at Neutral

JPMorgan analyst Bennett Moore assumes coverage on GrafTech (NYSE: EAF) with a Neutral rating.

The analyst comments: "Shares have retreated 7% since the 3Q beat (11/12) vs SPX/XME +2%/flat, presenting a more attractive entry point, in our view. While we maintain our stance that the graphite electrode market is structurally oversupplied, we now see a more balanced risk/reward backdrop given: 1) pricing appears to have found a floor; 2) management has demonstrated its ability to drive material cost downs; and 3) an influx of new money expected later this quarter should extend the liquidity runway well beyond 2025, alleviating a key overhang. Earnings are still likely to face pressure over the next 3-6mos, but we anticipate pricing can gradually reverse higher in early 2025. Taken together with FY25 shipments expected to grow low DDs, which should drive improved fixed cost absorption, we forecast a return to profitability in the back half of the year. We acknowledge structural tailwinds from the global transition to EAF steelmaking and the need for western sources of needle coke/synthetic graphite, but suspect both take years to unfold although the latter could get pulled forward amid ongoing geopolitical tensions. In the meantime, excess China capacity/India imports and potential tariffs on Mexico remain key risks. While we now see a more balanced risk/reward backdrop, we note shares are likely to face continued volatility until there’s more clarity on the trajectory of fundamentals and trade policy."

For an analyst ratings summary and ratings history on GrafTech click here. For more ratings news on GrafTech click here.

Shares of GrafTech closed at $2.03 yesterday.

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