Research note7 Sep 2023 09:31
from the singer research note: 'directa plus has announced the largest contract win in company history, a €5.5m three-year contract with liberty galati through dcta’s subsidiary setcar. the contract alone is impressive given there is the potential to expand up to a total value of €8.0m, however, we believe there is scope for this to become a meaningful part of the directa plus story moving forward. liberty galati is part of the larger $16bn turnover liberty steel group, yet this initial contract is focused solely on liberty’s galati operation in romania. liberty steel group produces c.2.7m tonnes of **** per year, although most of this is likely blast furnace byproduct as opposed to the oily mill scale product (a byproduct of the rolling process during steel production) within the scope of this new contract. globally, 2022 was a record year for steel production at 1.89bn tonnes (exceeding 1.88bn in 2019) and it is estimated that c.2.5% of the metal weight of the workpiece is ****ged during the rolling process, creating a sizable tam for dcta. we leave our forecasts unchanged, but this new contract, alongside a positive recent site visit, makes us think something is happening with dcta and that the business is on the brink of a commercial breakout. we retain our buy rating and 140p target price.'