Erdemir: attractive dividend yield, offset by cost pressures (HOLD - reinitiation of coverage)
We reinitiate coverage of Erdemir with a HOLD recommendation and a price target (PT) of TRY 30.0/share. On the one hand, we believe the company is positioned favourably to benefit from the restrictions on Russian steel exports, and is cost competitive enough to allow it to keep, or even expand, its market share of export destinations. Additionally, the company should benefit from the cooling of coking coal prices, given its close to zero integration into the material, which could, in turn, support its margins, even in the event of declining steel prices. Under such a scenario, its dividend yield could reach 16% for 2023E and c.10% for 2024E, on our estimates. On the other, the decline in raw materials prices may not be as sharp as steel prices fall, which could put pressure on Erdemir’s cost and profitability in the medium term, and result in limited upside for the stock, in our view.Eregli Demir Ve Celik Fabrikalari is engaged in the production of iron and steel rolled products, alloyed and non-alloyed iron, steel and pig iron castings, cast and pressed products, coke and their by-products.
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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Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
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