Export prospects support higher value, Overweight
Raise TP by 39% to EGP25/share. The restart of Ezz Flat Steel’s (EFS) flat steel operations in 4Q16 (mainly for export) has us raising total 2017e sales volume by 7% to 5.3mn tonnes—3/4 of our TP upgrade. Egypt’s now competitive currency allows for higher utilisation of the company’s flat steel capacity (which we now see ramping up to 70% by 2020 up from 15% in 2016e) and in turn group level margins. We also assume a lower WACC at ESR/ERM due to the assumption of 2017 debt drawdowns to fund new DRI working capital (16% of TP upgrade), and expect higher steel prices of EGP8,100/t in 2017, 7% below spot and 4% below import parity (6% of TP upgrade) after price rally in steel and raw materials drove Ezz Steel to raise rebar prices by 14% m-o-m to EGP8,673/t (after-tax). The stock trades c10% below peers’ 2017e EV/EBITDA at 6.3x, while our TP implies 6.9x.
AL Ezz Steel Rebars is an independent producer of steel in the Middle East and North Africa region which is based in Egypt. Co. produces long and flat products at its manufacturing facilities located in the port cities of Alexandria and Suez and in the Egyptian interior at Sadat City and 10th of Ramadan City and sells them to customers around the world. Co.'s long products consist principally of rebars and wire rods and are used for strengthening concrete in building and other construction applications. Co.'s flat products consist of hot rolled coil, which are thin gauge sheets manufactured to precise specification for makers of consumer goods and industrial products.
CI Capital is a diversified financial services group and Egypt’s leading provider of leasing, microfinance, and investment banking products and services.
Through its headquarters in Cairo and presence in New York and Dubai, CI Capital offers a wide range of financial solutions to a diversified client base that include global and regional institutions and family offices, large corporates, SMEs, and high net worth and individual investors.
CI Capital leverages its full-fledged investment banking platform to provide market leading capital raising and M&A advisory, asset management, securities brokerage, custody and research. Through its subsidiary Corplease, CI Capital offers comprehensive leasing solutions, including finance and operating leases, and sale and leaseback, serving a wide range of corporate clients and SMEs. In addition, CI Capital offers microfinance lending through Egypt’s first licensed MFI, Reefy.
The Group has over 1,700 employees, led by a team of professionals who are among the most experienced in the industry, with complementary backgrounds and skill sets and a deep understanding of local market dynamics.
CI Capital has been recognized as the “Best Investment Bank in Egypt” by EMEA Finance for four years running from 2013-2016, and by Global Finance in 2014 and 2015.
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