Petkim (PETKM TI) - Solid operations in 2Q19: Maintain Buy
Petkim’s 2Q19 net income of TRY319m was slightly lower than our estimate of TRY343m but in line with RT consensus of TRY317m. The deviation at the bottom-line came from higher-than-expected expenses related to the one-off non-operating item. Operationally, 2Q19 EBITDA of TRY536m came in line with our estimate of TRY541m and RT consensus of TRY519m. As we expected, the company posted a solid recovery backed by inventory gains in the midst of TRY depreciation and better naphtha crack margin on lower raw material prices.
Even though near-term appetite for the stock may be limited due to softening petrochemical prices, we still find value in Petkim as our 12M TP implies a 32% upside potential. Hence, we keep our BUY call on Petkim as we believe it offers an appealing transformation story in the long term, likely becoming an integrated petrochemical producer with visible cash generation capability.
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.
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