Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-biggest steelmaker by output, rose the most in a week as JPMorgan Chase & Co. removed a sell recommendation, citing valuation and the potential for improved profits.
Usiminas, as the company is also known, gained 2.6 percent to 6.75 reais at the close of trading in Sao Paulo. The Ibovespa stock benchmark added 0.9 percent. The steelmaker’s gain pared this year’s drop to 47 percent, the second-worst performance on the MSCI Brazil/Materials index, which is down 38 percent in 2013.
“We see incremental room for earnings improvement in the coming quarters as the management is focused on delivering operational improvements,” JPMorgan analysts including Rodolfo Angele wrote in a research note, in which they raised Usiminas to the equivalent of hold.
The stock’s recent drop has pushed it to a “more realistic” valuation of 6.2 times estimated earnings before interest, taxes, depreciation and amortization, compared with an industry average of 6.5 times, the analysts wrote.
Usiminas’s Ebitda rose 7 percent to 242.1 million ($106.3 million) in the three months through March from the prior quarter, according to data compiled by Bloomberg. The company is focused on “improving the operational efficiency” by cutting costs and increasing productivity, according to a statement posted on its website after first-quarter results were released.