Ternium's (TX) profitability is likely to benefit from potential upside to Mexican steel prices as the probability that the US will lower import tariffs on Mexican steel remains high, Morgan Stanley said in a Thursday research report.

The potential tariff change coincides with Ternium nearing the end of its investment cycle. The company has been investing to expand its steelmaking footprint in Mexico via its Pesqueria project, with a new slab facility expected to be operational in early 2027, according to the note.

The stock offers a compelling risk-reward, as it continues to trade below its 10-yr average price-to-earnings multiple, while US peers have re-rated, offering an attractive entry point, analysts wrote.

The brokerage said it upgraded the stock to overweight from equalweight and boosted its price target to $65 per American Depositary share from $55.

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