Erdemir (EREGL TI) - 4Q boosted by deferred tax gain: Maintain Buy
Erdemir reported net income of TRY1.7b (+41% y-y) in 4Q18, much better than our estimate of TRY1b and the RT consensus of TRY1.4b. The beat was primarily from TRY363m deferred tax income and slightly better operational performance. Operationally, 4Q18 EBITDA of TRY2.2b came 14% higher than our estimate of TRY1.94b and 11% better than the consensus of TRY2.0b. Despite challenging sector dynamics, EBITDA per unit was only down by 18% q-q to USD187/tonne in 4Q18, slightly better than our estimate of USD170/tonne on better sales volume.
Based on attractive dividend yield (13% on 2018E) and upside potential of 22%, we maintain our BUY call. However, we expect investor interest to be limited on waned profitability outlook driven by stagnant demand and high input costs. The stock trades at 4.5x 2019E EV/EBITDA, implying 10% discount to its emerging peers.
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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