Petkim (PETKM TI) - Moderate outlook to persist: Downgrading to Hold
Petkim posted net income of TRY236m in 3Q19, above our estimate of TRY150m and RT consensus of TRY174m. The deviation at the bottom-line came from deferred tax gain of TRY4m (vs. BNPPe tax expense forecast: TRY42m) and higher profitability. Operationally, 3Q19 EBITDA of TRY394m came 15% higher than our estimate of TRY340m and 8% above the consensus of TRY365m. The company posted a moderate operational performance backed by weaker naphtha crack margins (especially polymer products) and inventory losses in the midst of TRY appreciation.
We cut our call to HOLD for Petkim and lower our 12M TP by 17% to TRY3.99/sh., owing to weaker polymer prices. Even though we still like its promising transformation story with visible cash generation capability in the longer term, we look for a better entry point. Its petrochemical business trades at 7.1x EV/EBITDA on 2019E, implying a 7% discount to its peers.
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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