Petkim (PETKM TI) - Dismal profitability in 4Q18: Maintain Hold
We reiterate our HOLD call for Petkim but lower our 12M TP by 2% to TRY5.54/share on lower than expected profitability in 4Q18. After a dismal quarter in 4Q18 due to production and inventory losses, we believe that turnaround in 1Q19 would be also modest due to lack of supportive aromatics pricing and moderate polymer prices. Petkim’s petrochemical operations trades at 6.8x EV/EBITDA and 12.5x P/E multiples to its peers on our 2019E estimates, implying a respective premium of 12% and 4%.
Petkim posted net loss of TRY44m in 4Q18, lower than our net income estimate of TRY54m and weaker than RT estimate of TRY77m. The deviation came from weaker operating profitability on lower production volume. Accordingly, 4Q18 EBITDA of TRY75m came even lower than our below consensus estimate of TRY127m and much lower than the consensus of TRY185m, attributable to maintenance shutdown and inventory losses amid TRY appreciation.
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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