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1. Company Snapshot

1.a. Company Description

Vallourec S.A., through its subsidiaries, provides tubular solutions for the oil and gas, industry, and energy markets in Europe, North America, South America, Asia, and internationally.It operates through Seamless Tubes and Specialty Products segments.The company offers seamless tubes for refineries, petrochemical facilities, and floating liquefied natural gas plants, as well as production, storage, and offloading units; casings; tubings; VAM connections; rigid subsea line pipes, onshore rigid line pipes, and specialized tubes for transportation of oil and gas; and carbon steel and steel alloy tubes, hollow bars, and connections for the processing of industrial fluids, and oil and gas.


Its oil and gas market services include assistance in lowering tubes, inspecting connections, and supervising assembly; repair services for its products and thread tubes inventory management, advisory, and training services; tube inspection, maintenance, and repair services; on-site services; preparation for drilling operations; well coordination and supply services based on the drilling programs; integrated solutions for the subsea line pipe market comprising welding, coating, insulation, logistics, and service agreements; tube coating and welding services.The company's power generation market products and services comprise seamless tubes for steam generators.Its industrial market products and services include tubes and hollow bars, as well as circular, square, rectangular, and octagonal sections; tubular solutions for infrastructure construction; tubes and rings to manufacture cranes, construction machinery, agricultural machinery, and hydraulic cylinders; and tubes and axles for automotive manufacturers.


The company is also involved in the iron ore production business; and various projects concerning renewable energies.Vallourec S.A. was founded in 1899 and is headquartered in Boulogne-Billancourt, France.

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1.b. Last Insights on VK

Vallourec's recent performance was negatively impacted by a pullback in its valuation. The company's disposal of Serimax, a subsidiary specializing in welding solutions, for an enterprise value of €79 million, aimed to rationalize its invested capital and focus on its core business. Additionally, Vallourec announced a partial redemption of senior notes due in 2032, optimizing its capital structure. However, the company secured significant orders, including a $1 billion contract with Petrobras for offshore pipe supply, covering operations from 2026 to 2029.

1.c. Company Highlights

2. Vallourec's Q2 2025: Strong EBITDA Margin and Progress in Cost Reductions

Vallourec reported an EBITDA of EUR187 million for Q2 2025, slightly above the guidance midpoint, with a 22% EBITDA margin, one of the highest in recent history. The company's tubes volumes declined versus Q1 as anticipated, but both tubes and group EBITDA margins increased sequentially. The EPS came out at '0.1606', significantly lower than estimates at '0.42'. The company generated EUR57 million of total cash generation and returned EUR370 million to shareholders.

Publication Date: Aug -07

📋 Highlights
  • EBITDA Performance: Q2 EBITDA of EUR187 million, slightly above guidance midpoint, with a 22% EBITDA margin.
  • Cash Generation: Generated EUR57 million of total cash and returned EUR370 million to shareholders.
  • Brazil Performance Program: Ahead of schedule, targeting at least EUR150 per tonne cost reduction by year-end 2025.
  • U.S. OCTG Market: Volatile crude prices, reduced oil drilling, but increased gas drilling and significant OCTG orders in the Middle East.
  • Net Debt and Liquidity: Net debt of EUR201 million, with liquidity exceeding EUR1.5 billion, supporting financial stability.

Operational Performance and Cost Reductions

In Brazil, the company's Performance Program is ahead of schedule, with targeted cost reductions of at least EUR150 per tonne by year-end 2025. The company has completed major cost reduction actions, reduced headcount, renegotiated raw materials and logistics contracts, and improved production quality. According to the company's management, "The Brazilian Performance Program is on track, and we are confident that we will achieve the targeted cost reductions." This cost reduction plan is expected to fully benefit in 2026.

Market Trends and Outlook

The U.S. OCTG market saw volatile crude prices, reduced drilling activity in oil plays, but a partial offset due to increased gas drilling. The company announced significant OCTG orders in the Middle East, supporting results in the second half of 2025 and early 2026. For Q3, EBITDA is expected to range between EUR195 million and EUR225 million. The full-year outlook is confirmed, with expected group EBITDA improvement in the second half of 2025 versus the first half.

Financial Position and Valuation

The company delivered an 11th straight quarter of positive cash generation and turned back into net debt following significant shareholder returns. Net debt stands at EUR201 million, with liquidity remaining very comfortable at more than EUR1.5 billion. At current prices, the stock trades at a P/E Ratio of 10.39, a P/B Ratio of 1.81, and an EV/EBITDA of 4.12. The Dividend Yield stands at 9.33%, and the Free Cash Flow Yield is 10.03%. With a ROIC of 11.99% and an ROE of 15.28%, the company's profitability metrics are robust.

Conclusion on Growth and Valuation

Analysts estimate next year's revenue growth at 2.0%. Given the company's strong operational performance, progress in cost reductions, and comfortable financial position, the stock seems to offer an attractive valuation, with a potential upside if the company can sustain its EBITDA margin and achieve its growth targets.

3. NewsRoom

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Vallourec (ENXTPA:VK): Exploring Valuation Following Recent Share Price Momentum

Dec -02

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AMENDMENT TO THE TERMS AND CONDITIONS OF THE WARRANTS

Dec -01

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NATHALIE DELBREUVE IS APPOINTED AS CHIEF FINANCIAL OFFICER OF VALLOUREC AND JOINS THE EXECUTIVE COMMITTEE

Nov -28

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VALLOUREC RECEIVES INVESTMENT GRADE RATING FROM MOODY'S AND S&P

Nov -27

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Vallourec (ENXTPA:VK): Exploring Whether Shares Remain Undervalued After Recent Steady Performance

Nov -15

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Vallourec SA (VLOUF) Q3 2025 Earnings Call Highlights: Record EBITDA Margin and Strategic ...

Nov -14

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CORRECTION - Vallourec – Convening of the General Meeting of Warrant Holders

Nov -14

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Vallourec Third Quarter 2025 Results

Nov -14

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.65%)

6. Segments

Tubes

Expected Growth: 4.65%

Vallourec S.A.'s tubes segment growth of 4.65% is driven by increasing demand from the oil and gas industry, particularly in the US and Middle East. Rising energy consumption and infrastructure development also contribute to growth. Additionally, Vallourec's focus on premium and high-value products, such as OCTG and line pipes, supports revenue expansion.

Mine and Forests

Expected Growth: 4.65%

Vallourec S.A.'s Mine and Forests segment growth of 4.65% is driven by increasing global demand for steel tubes in mining and forestry applications, coupled with the company's strategic expansion into emerging markets, investments in innovative products, and operational efficiency improvements.

Inter-segment Transactions

Expected Growth: 4.83%

Vallourec S.A.'s 4.83% inter-segment transaction growth is driven by increasing demand for premium tubes in the oil and gas sector, coupled with the company's strategic expansion into high-margin markets. Additionally, the company's focus on operational efficiency and cost reduction initiatives have contributed to the growth.

Holding Companies and Other

Expected Growth: 4.5%

Vallourec S.A.'s 4.5% growth in Holding Companies and Other segment is driven by strategic investments in digital transformation, cost savings initiatives, and a focus on high-margin businesses. Additionally, the company's diversified portfolio and strong cash flow generation have enabled it to invest in growth opportunities, further contributing to its growth momentum.

7. Detailed Products

Seamless Tubes

Vallourec S.A. offers a wide range of seamless tubes for various industries, including oil and gas, power generation, and construction.

Welded Tubes

Vallourec S.A. provides high-quality welded tubes for applications such as oil and gas, automotive, and construction.

Premium Connections

Vallourec S.A. offers premium connections for the oil and gas industry, ensuring high-performance and reliability.

Line Pipes

Vallourec S.A. supplies line pipes for the transportation of oil and gas, meeting the highest standards of quality and safety.

Tubular Solutions

Vallourec S.A. provides tubular solutions for the oil and gas industry, including casing and tubing, drill pipes, and production tubing.

Project Management

Vallourec S.A. offers project management services for the oil and gas industry, ensuring efficient and timely project execution.

8. Vallourec S.A.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Vallourec S.A. is medium due to the availability of alternative products and services in the steel tube industry.

Bargaining Power Of Customers

The bargaining power of customers is high due to the concentration of large customers in the industry, giving them significant negotiating power.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the availability of multiple suppliers in the market, reducing their negotiating power.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the steel tube industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry is high due to the competitive nature of the industry, with multiple players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 40.81%
Debt Cost 12.49%
Equity Weight 59.19%
Equity Cost 15.97%
WACC 14.55%
Leverage 68.95%

11. Quality Control: Vallourec S.A. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
SSAB

A-Score: 6.4/10

Value: 8.5

Growth: 5.8

Quality: 4.4

Yield: 8.8

Momentum: 7.5

Volatility: 3.3

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Kemira

A-Score: 5.9/10

Value: 6.5

Growth: 6.0

Quality: 6.0

Yield: 6.9

Momentum: 2.5

Volatility: 7.7

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Acerinox

A-Score: 5.9/10

Value: 5.8

Growth: 4.4

Quality: 2.9

Yield: 8.1

Momentum: 7.5

Volatility: 6.7

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Vallourec

A-Score: 5.7/10

Value: 7.4

Growth: 3.9

Quality: 6.2

Yield: 5.0

Momentum: 6.5

Volatility: 5.0

1-Year Total Return ->

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Voestalpine

A-Score: 4.8/10

Value: 5.2

Growth: 1.3

Quality: 3.2

Yield: 5.0

Momentum: 9.0

Volatility: 5.3

1-Year Total Return ->

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CMC

A-Score: 4.4/10

Value: 3.9

Growth: 3.8

Quality: 4.5

Yield: 2.0

Momentum: 6.0

Volatility: 6.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

15.8$

Current Price

15.8$

Potential

-0.00%

Expected Cash-Flows