TX - Ternium Now In The Muddle-Through Phase

• Ternium surprised the Street with even weaker than expected Q4'21 EBITDA, as shipments weakened significantly more than expected in the quarter on higher imports.
• Mexico is technically in a recession now, though the export-driven industrial sector has continued to grow, and the government's mishandling of the economy remains an important concern.
• Import substitution remains an important part of the Ternium growth story, and I would expect management to look to add more value-added lines at Pesqueria.
• Ternium shares look meaningfully undervalued now, but steel stocks often lag while steel prices are declining, so be aware of the value trap risk here.

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