TURKEY CEMENT - Undemanding valuations offer opportunity
2017 was a rough year for cement producers as their profit margins were squeezed by a jump in energy costs amid a stable price environment. Consequently, in 2017, the cement stocks in our coverage lost 21% of their value and underperformed the XU100 by 17% in the last 12 months.
Cement consumption rebounded strongly in the first three months of 2018 on favourable weather conditions. Thanks to a pick-up in demand, cement manufacturers could raise prices twice in 2018. Despite significant input cost pressures, we expect EBITDA and net margins of companies in our coverage to expand in 2018.
After underperforming in 2017, the cement stocks in our coverage now offer attractive valuations supported also by improving 1Q18 fundamentals. Although we cut our estimates and TP on higher cost assumptions offsetting estimated price hikes, we believe the negatives are more than priced in. Hence, we upgrade Cimsa to BUY as our new target price of TRY16.16 offers an attractive 40% upside potential. We maintain BUY on Akcansa despite a c7% lower TP of TRY12.05 as the stock offers a 21% upside potential from current levels
Co. is engaged in the manufacture and sale of clinker, cement and ready mixed concrete, establishment of facilities for the same or their purchase in part or in full.
Cimsa Cimento Sanayi ve Ticaret is engaged in the cement industry. Co. produces and sells cement and ready-mixed concrete. As of Dec. 31, 2004, Co. maintains 17 ready-mixed concrete plants in 8 provinces.
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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