Petkim (PETKM TI) - Weak earnings momentum ahead: Downgrading to Hold
We downgrade Petkim to HOLD (from Buy) and lower our 12M TP by 20% to TRY7.32/share on weaker near term earnings momentum as naphtha prices rose faster than end-product prices. As such, we are cutting estimates by 14-36% over 2018-20E. Even though we still like its promising transformation story with visible cash generation capability in the longer term, we look for a better entry point. We also expect a maintenance shutdown in 2H18.
Petkim released net income of TRY131m in 1Q18, lower than our below-consensus estimate of TRY227m and Research Turkey consensus of TRY276m. The deviation at the bottom-line was attributable to weaker than expected operating profitability. Operationally, 1Q18 EBITDA of TRY218m came 32% below our estimate of TRY324m and 42% lower than the consensus of TRY378m.
Petkim Petrokimya Holdings is engaged in the production of petrochemical products. The product portfolio of Co. comprises goods such as thermoplastics, fibers, and raw material for paints, products which constitute primary inputs for a number of industries. These products are also used for the plastic, chemical, packaging, piping, paint, construction, agriculture, automotive, electricity, electronics, and textiles industries, as well as the pharmaceutical, detergent, and cosmetics sectors. Co. sells its products in the domestic market and in international markets.
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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