Earnings Review / Petkim (PETKM TI) - Overshooting profitability in 2Q18: Maintain Hold
Petkim reported net income of TRY371m in 2Q18, overshooting our estimate of TRY234m and Research Turkey estimate of TRY212m. The deviation at the bottom-line was due to higher than expected operating profitability and lower effective tax rate (10% in 2Q18 vs. our estimate 22%). Operationally, 2Q18 EBITDA of TRY441m came 35% higher than our estimate of TRY326m and 40% above the consensus of TRY378m, backed by stronger than expected aromatics pricing, inventory gain and TRY depreciation.
We maintain our HOLD call for Petkim but raise our TP by 5% to TRY5.05 on better than expected profitability in 2Q18. However, we believe that such strong profitability should be temporary as we see polymer prices reacting very slowly to the recent naphtha price increase. Even though we still like its appealing transformation story with visible cash generation outlook longer term, we look for a better entry point.
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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