TeraPlast: High growth incorporated (HOLD - transfer of coverage)
TeraPlast’s share price has quadrupled over the past 12M, with the stock becoming the best performer on the local exchange. The trigger was the sale of the steel business for RON 410m, 78% of its market cap at the time of the announcement (July 2020). This was followed by a decision to increase its capacity in installations and expand into packaging. The share price performance was also supported by the aggressive growth targets assumed for 2021-22E, to help the company recover the profit lost after the sale of the steel and window profiles businesses, in full, coupled with the plans for further expansion via M&A or greenfield projects. Over 2020-22E, we see the investments being executed currently generating a CAGR of 46% in sales and 51% in EBITDA for the core business. The demand outlook is highly encouraging, with ample funds available for infrastructure works. The company is analysing potential venues for further growth, which we expect to materialise into a high growth rate starting in 2023E. For 2020-26E, we estimate an EBITDA CAGR of 27%. We believe that the current share price already incorporates the growth guidance provided by the company, and we transfer coverage of TeraPlast with a HOLD recommendation and a price target (PT) of RON 1.205. We believe that a re-rating might be possible after TeraPlast announces its plans for 2023E-onwards.
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