Gedik Investment: Kardemir (KRDMD) Company Update Report

Medium-Term Catalysts: i) Although there have been preliminary signals that China may begin phasing out up to 50mn tons of older or inefficient steel capacity over the coming years as part of its green transition agenda, concrete implementation remains limited as of now. Moreover, should conditions emerge for a shift in sentiment regarding China’s infrastructure and construction sectors—from stagnation to a more optimistic outlook—we highlight that a rapid share price rebound could materialize. That said, we view such a scenario as unlikely before 1H26. ii) The Ministry of Trade introduced a revision to the Inward Processing Regime (DIR), shortening the validity periods of Inward Processing Permits (DIIB) and imposing a minimum 25% domestic procurement requirement for products used in exports. This move directly supports local steelmakers by enhancing demand for domestically sourced inputs and curbing unfair competition from imports. iii) The Company currently operates with an annual railway production capacity of ~100k tons, which is expected to double post-2025 through a relatively modest CapEx program. Note that, in 2025, Kardemir signed a sales contract for 15k tons of rails within the scope of the Ankara–İzmir High-Speed Rail Project. Given the limited public disclosure regarding the timing, phasing, and financial impact of the announced investment program, we have not factored any related assumptions into our model at this stage—across revenue, margin, CapEx, WC, or taxation lines.

Medium-Term Risks: A mild recovery in global demand is expected in 2025, with a projected growth of ~1.2% YoY to 1.77 bn tons. However, it should be noted that the World Steel Association’s “Short Range Outlook (Oct24)” report projected this figure, while the Apr25 update has been postponed. The rebound is anticipated to be more visible in ex-China markets, particularly in India, where 2025 consumption is expected to grow by approximately +8% YoY, driven by ongoing infrastructure investments and industrial expansion. However, oversupply risks persist due to delayed capacity additions and China’s record-high exports (110.7mn tons in 2024), which could further cap price recovery.

Valuation: Our model fine-tuning resulted in a modest upward revision of our fair value estimate from TL30.32 to TL32.06; nevertheless, we downgrade our rating from “Outperform” to “Marketperform” due to limited upside potential following the stock’s 7% outperformance vs. the XU100 (+18% nominal) since our last update in Jun25. The stock trades with 5.3x 2025E EV/EBITDA multiple, has 37% premium on its 5y avg. multiple yet; ~17% discounted to its 10y avg. multiple.