Kardemir (KRDMD TI) - Unenthusiastic recovery ahead: Maintain Hold
Kardemir reported net loss of TRY129m in 4Q19, weaker than our loss estimate of TRY105m, but roughly in-line with Research Turkey’s loss estimate of TRY139m. Despite better than expected operating profitability and deferred tax gain of TRY24m, the divergence at the bottom-line originated from higher than expected financial expenses. Operationally, 4Q19 EBITDA of TRY79m came better than BNPPe of TRY34m and RT consensus of TRY55m. EBITDA/ton of USD24/t in 4Q19 came above BNPPe of USD10/t (vs USD128/ton in 4Q18). Despite the dismal steel making margins driven by weak steel prices, we envisage that the higher than expected profitability might be attributable to higher than expected shipments of value added products in 4Q19.
We maintain our HOLD rating and lower our TP by 3% after we roll over our base year to 2019 financials. Based on current long steel pricing and demand outlook, we expect less impressive turnaround to start by 1Q20. However, we believe that current levels already reflect the associated prospects.
Kardemir Karabuk Demir Celik Sanayi ve Ticaret manufactures and sells raw iron and steel products and coke and coke side products. KARABUK Co.'s products include: Steel Products - Blooms, Billets and Beam Blank; Rolling Mill Products - Hot Rolled Round Steel (Bars), Hot Rolled Round Steel (Deformed Bars), Steel Nip Beams, Steel Npu Profiles, Equal Angles, GI Profile, Rails and Billets; Coke Products - Coke Plant Products, Ammonium Sulphate, Pressed Naphthalane, Tar Paint, Carbolic Oil, Grude Benzole, Refine Washed Oil and Crude Tar and Other Products - Pig Irons, Granule Slag, Oxygen, Nitrogen, Argon.
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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