AD Plastik: Nerves of steel (stays HOLD)

In this update, we reflect the company’s weaker performance than expected this year and also reduce our estimates for 2022-23E, due mainly to the ongoing global chip shortage. We have lowered our 12M price target (PT) to HRK 176/share (from HRK 203/share), which produces 9% upside and a HOLD recommendation (unchanged). While consumers have been hungry for both new and old cars globally, automakers have been struggling to satisfy the demand, leading to lower revenues at AD Plastik and its 50%-owned subsidiary EAPS. We expect the company’s results to keep improving in the coming quarters, supported by the start of new contracts in 1H22E, and driven by a general improvement in PCs production in 2H22E, assuming that the semiconductors issue is solved by then. We note that, despite the weaker revenues than expected, the company has been managing the difficult conditions well, with solid profitability, a strong financial position and the ability to pay a dividend next year. We believe our current estimates are conservative and, once the outlook becomes clearer, in 1Q22E, we look forward to updating our numbers. AD Plastik trades at our 2021-23E P/Es of 8.6-21.7x and EV/EBITDAs of 5.8-7.7x, broadly in line with its peers.
Strong demand, weak supply. The global chip shortage is persisting and the situation might stretch well