Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-biggest steelmaker by output, rose the most since September as Credit Suisse Group AG recommended the stock, citing its attractive valuation and the potential for improved profits.
Usiminas, as the company is known, gained 15 percent to 7.55 reais at the close of trading in Sao Paulo, the steepest one-day advance since Sept. 5. The Ibovespa stock benchmark added 2.6 percent.
After losing 49 percent this year, Usiminas is “a low-hanging fruit,” Credit Suisse analysts including Ivano Westin wrote in a note to clients today after raising the recommendation on the stock to the equivalent of buy from sell. The investment bank expects the steelmaker’s gains to increase this year as a weaker Brazilian currency allows for “possible market share gains” and higher prices in the domestic market.
The real depreciated 10 percent in the second quarter.
Usiminas trades at 5.9 times estimated earnings before interest, taxes, depreciation and amortization for 2014, or a 10 percent discount compared to global peers, according to Credit Suisse calculations. The bank expects Usiminas’s Ebitda to increase by 41 percent next year to 1.97 billion reais ($870 million).
Credit Suisse was the third bank to boost its rating on Usiminas this month. Bank of America on July 1 increased the stock to hold from sell, saying the company may raise prices in Brazil in the second half of this year or the first half of 2014. JPMorgan Chase & Co. also erased a sell recommendation on the steelmaker on July 10, noting operational improvements that will pave the way for earnings to improve in coming quarters.
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.