Morgan Stanley has initiated coverage of Dauch with a Buy rating and a $10.35 price target, citing significant upside potential from the recent merger of American Axle & Manufacturing and Dowlais Group. The combined entity creates an $11 billion revenue global Tier 1 supplier and the sixth largest in North America, with Dowlais contributing roughly half of combined sales and EBITDA.

The brokerage argues the $300 million cost synergy target appears conservative, estimating potential synergies could reach $500 million based on comparable supplier mergers like Faurecia-HELLA and Schaeffler-Vitesco Technologies. Morgan Stanley expects fiscal 2026 to be a transition year, with first quarter results likely weak due to merger timing and slow January production. The firm forecasts EBITDA margin expansion to 14% in fiscal 2027 from 3.1x net debt to EBITDA in fiscal 2026.

Morgan Stanley values Dauch at 5.0x fiscal 2027 EV to EBITDA, below North American peers at 5.6x, while highlighting the combined portfolio's positioning in the current US auto cycle. The brokerage notes potential benefits from customer and geographic diversification, particularly if demand shifts back toward internal combustion engine vehicles. The bank's analysis suggests meaningful deleveraging and margin expansion opportunities as the merged entity integrates operations.