Hektas (HEKTS TI) - Volume growth continues: Maintain Buy
Hektas’ 2Q19 net profit was slightly below our estimate. Although EBITDA was in-line with our estimates, higher than expected financial expenses caused the bottom-line miss. Revenue was broadly in-line with our estimates.
The agricultural chemicals segment, which made up c80% of Hektas’ revenue in 2Q19 continued to grow strongly as y-y sales volume accelerated in 2Q19. Meanwhile the fertilizer segment sales volumes grew 231% y-y - benefitting from a low base as it became operational only last year.
We adjust our assumptions to factor the announcement of the newly rented relatively large property and trim our TP. We maintain BUY on the stock as we expect significant revenue and profit growth for the next 4 years given the nearly 55% capacity expansion in agricultural chemicals and a sevenfold capacity expansion in the fertilizer segment.
Hektas Ticaret TAS. Hektas Ticaret TAS (Hektas) is a Turkey-based company engaged in the production and marketing of agricultural chemicals and veterinary products and medicines. The Company operates two factories in the Gebze and Sanliurfa Organized Industry Zones. The Gebze Plant has an annual production capacity of 52,766 tons, whereas the Sanliurfa Plant has an annual capacity of 22,360 tons. It offers agrochemicals and veterinary products, including agricultural and home insecticides, herbicides, fungicides, foliar fertilizers, plant growth regulators, fumigants, organic farming products, antibacterial and antiparasitic drugs, vitamins and hormones. The Company's products are marketed to over 1,500 dealers and distributors of agricultural chemicals and pesticides through its regional offices in seven cities across Turkey. The Company is a subsidiary of OYAK.
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