BlueScope Steel (BSL) – Kiwi Upside

BlueScope Steel produces and markets in hot rolled coil,coated and painted steel building products in Australia, New Zealand, Asia, North America and elsewhere. Its best-known brands include COLORBOND, COLORSTEEL, ZINCALUME and LYSAGHT. The company was spun out of the then BHP-Billiton Group in 2002 and is headquartered in Melbourne.‍

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BlueScope Steel (BSL) recently hosted an investor day, where the company showcased its new electric arc furnace (EAF) at its Glenbrook operations near Auckland, its decarbonisation plans, and an outline of plans for its surplus property assets. Commissioning of the new Glenbrook begins from this week, with first steel scheduled for April next year, while BlueScope is aiming for full output from the EAF in FY27.

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Ord Minnett views the EAF project as positive, with a boost at the earnings before interest and tax (EBIT) line of $80 million annually targeted for the New Zealand division. Against the $160 million investment from BlueScope, this looks to be an optimal use of funds if the targets can be achieved. BlueScope is considering a variety of options for its surplus property assets, including direct sales, but there are complications around leases and proximity to its plants that contribute to lower energy costs. Valuation details on its portfolio are being developed, but no release date was supplied.

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Post the investor day, we have left our FY26 EPS forecast unchanged, while our FY27 and FY28 estimates are both raised by 2.4% to incorporate increased earnings from the New Zealand assets. Our target price on BlueScope increases to $27.50 from $27.00, and we maintain Buy recommendation.