Maintain OW; c40% discount to peers unjustified
Reiterate Overweight at 23% higher TP of EGP860/share. We raise our 2017e revenue and EBITDA estimates by 18% and 22%, respectively, on higher steel prices and volumes from EFS, leading to our 12-month target price upgrade to EGP860/share. Ezz Steel is enjoying strong pricing power amid the prevailing inflationary environment (3Q16 gross margins rose to 13.3%, up from an average of 5.2% in 1H16), mainly through EZDK. EZDK trades on a 2017e EV/EBITDA of 4.0x, 43% below the sector, despite above-average EBITDA growth in 2016-18e of 56% (vs. 15% for the sector). EZDK’s growth is mainly due to a rising top line contribution from EFS (to EGP10.0bn in 2017 from EGP2.3bn in 2016).
Al Ezz Dekheila Steel Company Alexandria SAE. Al Ezz Dekheila Steel Company Alexandria SAE (EZDK) is an Egypt-based engaged in the manufacture and production of steel in different types and forms. The Company's direct subsidiaries include Al Ezz Steel Sheet Manufacturing Company SAE, which focuses on the production of coil and rolled flat steel strips, and Steel Company for Industry, Trade and Contracting Company (Contrasteel) SAE, which is focused on the manufacture and trade in all types of metal and metal products. The Company also holds shares indirectly in Egypt Company for the Manufacture of Pipes Supplies and Casting SAE, which is engaged in manufacturing pipe supplies and construction supplies, as well as mechanical equipments. The Company is 55%-owned by Al Ezz Steel Rebars.
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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