Cognor - More Upside Ahead
After its 2020 Q4 results turned out better than expected, in 2021 Cognor is eyeing growing profits driven by stronger demand for steel for infrastructure projects and automaking, and expanding margins on sales. The Company wants to return to paying dividends this year, and it expects to declare the size of the 2021 payout in April or May (we expect DPS of PLN 0.13). In March the European Parliament could decide on the initial shape of the so-called carbon tax on products imported to the EU that is likely to reduce competitive pressures on local steel makers like Cognor. We have updated our models for Cognor to adjust for lower-than-expected FY2020 ending net debt and assumed interest payments, and to reflect increased earnings expectations. After correcting also for increased valuations of Cognor’s peer group, we raise our target price from PLN 2.89 to PLN 3.19 and we maintain a buy recommendation for COG even after the over-170% rally the stock has witnessed since we first turned bullish on it in August 2020.
Cognor Holding SA, formerly Cognor SA, is a Poland-based company that operates in the steel industry. The Company's activities are divided into four business segments: Scrap, Production, Distribution and Other. The Scrap division focuses on buying, processing, refining and selling of scrap metal and nonferrous scrap. The Production division is responsible for processing scrap metal into steel billets, as well as converting steel billets and nonferrous scrap into finished products. The Distribution division sells various commodities, such as steel products, steel and nonferrous scrap and steel billets. The Other division includes materials recycling, among others. The Company's products range comprises metal bars, steel sheet, plates, pipes and rods, as well as sheet zinc and tin plates, among others. It operates through a number of subsidiaries, such as Cognor Blachy Dachowe SA, Zlomrex Metal Sp z o o and Huta Stali Jakosciowych SA. The Company is controlled by PS Holdco Sp z o o.
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