Erdemir (EREGL TI) - Outstanding numbers as expected: Maintain Buy
We raise our EBITDA and net income estimates by 17%/19% for 2018E on stronger near-term steel pricing and updated macro forecasts. We estimate a flattish EBITDA at TRY6.4b in 2019 as we expect normalization in steel-making margin. We thus revise up our 12-month DCF-based TP by 12% to TRY13.41.
Backed by strong cash generation and potential capacity expansion plan, we stick to our BUY call on Erdemir. The stock trades at 5.4x EV/EBITDA and 8.9x P/E on our 2018 forecasts, implying respective discount of 14%/17% to its emerging peers.
Based on its defensive qualities and appealing dividend yield, we believe that the stock should outperform its benchmark in the midst of volatile macro conditions.
Eregli Demir Ve Celik Fabrikalari is engaged in the production of iron and steel rolled products, alloyed and non-alloyed iron, steel and pig iron castings, cast and pressed products, coke and their by-products.
TEB Investment equity research analysts and strategist team consists of 8 analysts with an average finance sector experience of 15 years and special focus on international investors.
With our 6 equity research analysts we cover 93 companies across 21 sectors, reflecting 80% of the total market capitalization of all BIST companies and 86% of the BIST100 companies. Our strategy team provides in depth top-down and bottom-up market views with insight on FX and bond markets by publishing sectoral and strategic reports both in English and Turkish.
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