Summary
- Thyssenkrupp is morphing into a cash‑rich holding company; net cash now tops €4 billion, erasing the debt fear that kept the stock under €4 last year.
- Management is pushing two fresh spin‑offs—Materials Services and Automotive Technology—on the heels of the Nucera listing, aiming to surface value trapped inside the old conglomerate.
- Steel Europe’s hydrogen DRI plant and the EP Corporate Group energy tie‑up position the firm to sell premium green steel just as EU carbon rules bite competitors.
- Marine Systems, with an €18 billion backlog and a planned IPO, could be worth half of Thyssenkrupp’s present market cap if it prices near pure‑play defense peers.
- Even after a triple, the shares trade at 0.2 × sales and about 3 × enterprise value to forward EBITDA; a successful break‑up could drive 35 % upside over 12
A New Thyssenkrupp for a New Cycle
Thyssenkrupp’s share price has tripled in the past 12 months. That surge chased one idea: the mighty German conglomerate is shrinking by choice, not by force. Chief executive Miguel López is carving the group into focused companies, clearing debt, and pitching investors the first real break‑up story in a decade. The rally is large, but the task is larger. In my view the upside is not exhausted, because the plan lines up with deep industrial trends—green steel, national defense, and a fresh wave of European on‑shoring.
The thesis is easy to state. A cash‑rich holding that owns separate, well‑funded units should trade at more than the sum of its stressed parts. Right now the market still applies the old discount. Forward enterprise value is about €4 billion, less than 0.2x sales and roughly 3.8x EBITDA, while book value sits near €12 billion. That gap leaves room for gains if management keeps hitting milestones.
Breakup Blueprint Gains Speed
Late May marked the biggest step so far. Management announced that Materials Services and Automotive Technology will follow last year’s Nucera IPO and move toward outside listings within two years. Investors cheered, pushing the stock up 9 % on the day. Morgan Stanley warned that the price now bakes in a 30 % premium to a simple sum‑of‑parts, so execution must match the promise. I agree the bar is higher, yet the structure makes sense. Separate units can tap capital, set pay tied to their own returns, and shed the slow culture that haunted the old empire.
The holding design also keeps cash in the center Because a minority stake is sold with each spin-off, Thyssenkrupp can reuse the proceeds for share buybacks or a higher dividend. That alone is worth a re‑rating, because the group once depended on asset sales just to pay bills.
Green Steel and Power Costs
Any discussion of Thyssenkrupp starts with steel. The Duisburg works once symbolized German heavy industry; in 2025 they symbolize its climate gamble. A €3 billion hydrogen‑based direct‑reduction plant is under construction, backed by €2 billion in state aid. Green power will come in part from EP Corporate Group, which bought 20 % of Steel Europe this spring and may lift its stake to 50 %. This joint venture swaps equity for secure energy, a fair trade when hydrogen will soon make up half of production cost.
Unions have accepted the pain. A July labor pact allows 11,000 job cuts by 2030 and shorter workweeks, with no forced layoffs. That deal lowers fixed cash burn while keeping social peace—no small feat in Germany’s steel heartland. Critics still worry about power prices; ArcelorMittal shelved two German DRI projects in March, citing high energy costs. I see the risk, yet the state and EPCG give Thyssenkrupp a safety net that rivals lack.
Defense Yard Becomes Its Own Story
The other crown jewel is Marine Systems. Submarine orders from Germany, Norway, and Singapore lifted the unit’s backlog above €18 billion, and a €1 billion down‑payment in Q1 added welcome liquidity. Management wants to float a minority stake by the end of 2025, creating a pure naval defense stock at a time when NATO budgets are rising fast. Stand‑alone peers trade near ten times EBIT, far above the four‑times multiple the market assigns to the group. If the spin prices at even eight times, shareholders see instant value.
There is also a strategic play: countries want local control over shipyards. A listed Marine Systems with German roots and public investors should find it easier to win work than a division hidden inside a steel conglomerate.
What the Recent Numbers Tell Us
Second‑quarter figures were messy, but the direction was clear. Orders fell 6 % year on year to €8.1 billion and sales slipped to €8.6 billion. Adjusted EBIT dropped to €19 million as auto clients cut volumes and a blast‑furnace outage hit steel. Yet the group stayed in the black, thanks to the APEX cost program, and net income reached €167 million after a €321 million gain from selling the Indian electrical‑steel arm.
Free cash flow before M&A was –€569 million, hurt by VAT on that big submarine advance. Strip out this tax swing and working capital noise, and first‑half cash burn was €138 million lower than last year. The improvement is slow. Management reaffirmed full‑year targets: €600‑1,000 million EBIT and up to €300 million positive free cash flow by September. Meeting the midpoint implies a strong summer, yet steel prices have begun to tick up and Marine projects are moving from design to production, which should lift revenue recognition.
Reading the Balance Sheet Right
The bigger story hides on the balance sheet. Thyssenkrupp now holds €5.2 billion cash against only €930 million gross debt, for €4 billion net cash after leases. That is a long way from the crisis years when net debt topped €6 billion. Pension obligations remain large, but higher discount rates trimmed those liabilities by nearly €400 million in H1. Liquidity of €5.9 billion, including undrawn lines, gives López room to ride out a downturn and fund the green‑steel build. In other words, the liquidity risk that once pushed the share below €4 is gone.
Valuation Signals Room to Run
At €11 the stock trades near 14x forward earnings, but earnings are still depressed. On an enterprise basis, investors pay only 3 times next year’s expected EBITDA, because net cash knocks EV down. A sum‑of‑parts view suggests more upside. Marine Systems alone could be worth €2 billion. Nucera’s 53 % stake is public and worth roughly €0.7 billion. If Steel Europe’s half‑interest commands €1.5‑2 billion after the EPCG deal, the remaining Materials and Auto units need to fetch only low single‑digit multiples to cover today’s market cap. Everything else—pension surplus, cash, corporate costs—comes free.
The reinstated dividend is small at €0.15, or a 1.4 % yield, but it matters because it tells the market that the payout is back for good. As cash flow improves, I expect a steady climb toward a 3 % yield in 3 years. Buybacks could follow once capex on the hydrogen plant tails off.
Risks That Could Derail the Plan
A deep European recession would reduce auto steel demand and extend cash burn. Energy costs could spike again, delaying breakeven at the green mill. Tariff talks between the U.S. and EU might fail, reviving 25 % duties on German steel. And every carve‑out invites execution risk: delays, weak pricing, or union pushback could sap the value unlock. Finally, a pension deficit could resurface if rates fall. These threats are real, yet the current cash amount and state support soften the blow.
Bottom Line: Why I Still Like the Stock
The share is no longer cheap, but the enterprise value tells a different story. Investors today own a debt‑free company plus stakes in a defense unit, a green hydrogen player, a soon‑to‑be‑revamped steel maker, and two cash‑light industrial units—all for about 3 times EBITDA. The market is starting to price that story, yet the full value of the coming listings is not there.
My 12‑month target is €15, based on a blended 8‑times EV/EBIT for the operating units once the Marine and Steel transactions close. That implies about 35 % upside plus the small dividend. Europe needs clean steel, Germany needs submarines, and Thyssenkrupp finally has the cash and the clarity to meet both calls. For patient investors the next act should be worth watching—and owning.