Kety: High dividends, but profitability eroding (HOLD - initiation of coverage)

We initiate coverage of Kety with a 12M price target (PT) of PLN 380/share, implying 6% upside potential and a HOLD rating. Kety produces aluminium parts for the automotive industry, flexible packaging for the food industry, and aluminium systems for the construction industry. Its development plans assume: i) the expansion of capacity production; ii) increasing exports to foreign markets; iii) possible M&A; and iv) increasing the diversification of its revenue base in favour of the less cyclical consumer sector. Although we like the company for its transparency and high dividend yields (c.6% from the net profit in 2018-20E, on our estimates, nearly double those for the WIG Index, on the Bloomberg consensus), we believe that, on our forecasts, the current stock price does not offer enough upside potential. We note that Kety trades at 32-33% premiums vs. its peers on our 2018-20E EV/EBITDA multiples, and a -17% discount/21% premiums on its 2018-20E P/Es. We believe that Kety deserves to trade at a premium due to its high dividend yields (1.7-2.9ppts greater than its peers).