UPDATE: Societe Generale Resumes Coverage on Constellium NV with Buy Rating, Lowers PT as Auto and Aero Growth Opportunities Remain Abundant

In a report published Monday, Societe Generale analyst Alasdair Leslie resumed coverage on Constellium NV CSTM with a Buy rating and $25.00 price target, up from $23.00. In the report, Societe Generale noted, “Following the recent secondary offering we resume coverage with a Buy rating and a $25 target price (was $23), giving 16% 12m projected upside on a TSR basis. Key points recent Q3 results and the earnings call: 1) Aerospace demand remains strong Unlike peers, Constellium sees no inventory overhang given a) market share gains (Airbus supply contract); b) competitive advantages such as high value products (Airware) and global footprint (can supply from both Europe and North America); c) >90% of business secured by five year contracts with limited exposure to spot markets (<10%); 2) Outlook for automotive supported by a) increasing penetration of Aluminium on mid range, high volume cars (was high end, low volume) and b) market share gains on new models driven by new product development (c.f. new contract win with German OEM supplying 70% of aluminium body sheet through new Strongalex product brand); 3) Continuing focus on optimising the cost base. Constellium has reduced fixed costs by a further 5% ytd post cumulative 2010-2012 cost savings of €173m (o/w €116m permanent); 4) Net debt end Sept €181m (0.7x net debt/LTM adjusted EBITDA) with a seasonally strong Q4 still to come. Underlining confidence in the operations, the board are considering the adoption of a regular dividend with a target leverage ratio of 1.5x. A decision will be made in early 2014.” Constellium NV closed on Friday at $21.93.