BlueScope Steel Ltd (BSL) $22.93

BSL has outperformed the market in 2025, advancing +22.7% year-to-date. However, it remains only slightly above its 5-year average valuation, which, at a glance, feels “rich” for a company exposed to an economic slowdown. The company delivered a strong 1^st half result in February, with 1H25 EBIT of $309m, at the upper end of $270-310m guidance; consensus was lower at $299m after the company’s profit-warning in October, which guided to ~25% lower earnings as Chinese exporters flooded the market with cheaper product.

It’s easy to comprehend why this steel producer of products such as Colourbond will be impacted by an economic slowdown, especially with almost 50% of its FY24 revenue coming from North America. If the US economy grinds to a halt, BSL earnings will suffer accordingly.

• We don’t believe BSL’s current valuation is compelling considering the risks, even while they are performing strongly.

We like how BSL is performing as a business, but for reasons outside of its control, it could easily struggle in 2025/6, and we don’t believe its current share price reflects these very real risks.

• We don’t like the risk/reward towards BSL around the $23 area.