AMENDED – Cognor Holding: record results could serve as re-rating trigger (BUY - initiation of coverage)
ERRATUM: We have corrected a presentation error in this report. We confirm that the rest of the report remains unchanged. Please disregard the report sent to you previously.We initiate coverage of Cognor Holding (Cognor) with a BUY recommendation and a price target (PT) PLN 6.2/share. We anticipate the company to demonstrate an impressive performance for 2022E and above historical average results for 2023E, before the business’ key metrics stabilise, going forward. This, in turn, creates potential upside for Cognor’s dividend yield in 2023E, which we now model at 4.1%, but it could rise to 13.7%, another potential re-rating reason, in our view. Separately, the key risks/weak points of the business include: production decline and a costs increase, due to the conflict in Ukraine; a deterioration of the financials, on the back of the global economic slowdown; and a less competitive stance, as an EAF steelmaker, compared to the BOF producers in the EU. Precisely because of these issues, we value the name below the average for its historical 12MF and 24MF multiples, but it remains a BUY even at discount to them.
Cognor Holding SA, formerly Cognor SA, is a Poland-based company that operates in the steel industry. The Company's activities are divided into four business segments: Scrap, Production, Distribution and Other. The Scrap division focuses on buying, processing, refining and selling of scrap metal and nonferrous scrap. The Production division is responsible for processing scrap metal into steel billets, as well as converting steel billets and nonferrous scrap into finished products. The Distribution division sells various commodities, such as steel products, steel and nonferrous scrap and steel billets. The Other division includes materials recycling, among others. The Company's products range comprises metal bars, steel sheet, plates, pipes and rods, as well as sheet zinc and tin plates, among others. It operates through a number of subsidiaries, such as Cognor Blachy Dachowe SA, Zlomrex Metal Sp z o o and Huta Stali Jakosciowych SA. The Company is controlled by PS Holdco Sp z o o.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
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