EKHO released 1Q23 financial results, posting a 77% QoQ (-16% YoY) increase in consolidated net profit to record USD60 million, compared to USD34 million in 4Q22 and USD71 million in 1Q22. Consolidated revenues declined 12% QoQ (-23% YoY) to USD225 million in 1Q23, down from USD255 million in 4Q22 and USD291 million in 1Q22. Growth in Sprea Revenues Alleviates Some Pressure off Consolidated Total Revenue Consolidated group revenues were shaped by: * Alexfert revenues declined to USD77 millio...
Maintain OW; Cut TP c18%. Our 12M TP cut reflects a 2% higher WACC assumption and 16% higher natural gas price at AlexFert following the latest gas price amendment. EKH trades on a 2023e EV/EBITDA of 3.0x (based on the EGP listing), a c40% discount to global peers, unjustified in our view, with its 2023-25e EBITDA CAGR of -1.7% being in line with global peers. EKH also offers a dividend yield of 11.5% in 2022e, paid in USD for all listings.Beyond a urea/gas story. On 15 September, the Egyptian g...
Raise 12M TP by 36%, on favourable industry dynamics. We raise 2022-24e EBITDA for MOPCO by an average of 24%, on higher urea price assumptions to reflect a more protracted period of tightness in global urea supply. Developments in Russia have a two-fold bearing on urea; by reducing export supply from Russia (c18% of the global urea merchant market), as well as placing upward cost pressure on European gas-based production. On our new 12M TP for MOPCO of EGP174/share, we see ~91% upside on the st...
The independent financial analyst theScreener just awarded an improved star rating to MISR FRETILIZERS (EG), active in the Speciality Chemicals industry. As regards its fundamental valuation, the title receives an improved star rating and now shows 1 out of 4 possible stars. Given its market behaviour as moderately risky, theScreener considers that these elements allowing slightly upgrading its general evaluation to Neutral; the title, however, remains unattractive. As of the analysis date Febru...
Cut 12M TP by 10%. We update our forecasts to reflect: i) higher than previously expected export prices, ii) a local quota of 55% (30% previously), but at the 47% higher local urea subsidy price (USD287/t), gradually reaching full liberalisation of USD340/t by 2027e, and iii) 2023-27e average gas price of USD5.9/mmBtu. This gas price is +1.7x vs. the formula implied gas price (so far in place), as the government demonstrates increased involvement to maximise its profit windfall from elevated com...
LOCAL QUOTA PRICES AND VOLUMES ADJUSTED TO NARROW THE GAP WITH INTERNATIONAL PRICES AND IN TANDEM WITH RECENT HIKE IN GAS COST In a move to narrow the gap between local quota fertilizer prices and international pries, nitrogenous fertilizer producers are now required to supply 55% of their production to the Ministry of Agriculture, a percentage equivalent to about 3.7 million tons annually, which covers the demand of the local market. Local prices have been raised from EGP2,900 per ton to EGP...
COMMODITY RALLY CONTINUES, FUELLING ROBUST EARNINGS Egypt Kuwait Holding reported 3Q21 consolidated results. 3Q21 revenue came in at USD211.6 million (+14%QoQ, +45%YoY), which was primarily owed to EKHO’s fertilizers and petrochemicals segment which boasted a 60%YoY hike in revenues. EKHO’s bottom-line stood at USD 63.8 million in 3Q21 (+13%QoQ, +68%YoY), implying a strong NPM of 30.2%. Gross profit came in at USD96.0 million (+16%QoQ, +71%YoY), which implies a GPM of 45.4%, versus the GPM of...
UREA MARKET IS TEARING IT UP Just as the pandemic dragged Urea prices in early 2020, it appears to have completely turned a corner and grew into a contributor to the rally, albeit in an implicit way as prices hit (USD950/ ton in Egypt, USD875/ton in Europe, USD750/ton in North America and lastly USD625/ton in China). Prices have been buoyed by several factors, including: i) the ensuing energy crunch in Asia and Europe, which forced major urea producers to scale back production, and in some ca...
Urea fundamentals beat. Granular urea prices have risen c170% y-t-d to USD752/t (Egypt, fob), spurred by rising energy costs. Europe’s energy crisis has sent natural gas prices to a record USD31/mmBtu (Dutch TTF gas hub), and a cutback on coal production in China has propelled the price of coal (c75% of its urea production) to a 2012-21 high of USD153/t. This situation will likely persist over 1Q22. While crop inventory is low, we predict that the combination of: i) new urea capacity hitting the...
UPGRADE TP TO USD2.03/SHARE; MAINTAIN OVERWEIGHT We upgrade our valuation for EK Holding to USD2.03/share (up from USD1.61/share). The upgrade factors in: i) Stronger Urea price outlook for Alex Fert, ii) a recovery in Sprea’s export activity post the expected demand recovery within its export markets, alongside incorporating its expected expansion plans including, expanded Formica sheet production, SNF capacity additions and a sulfuric acid product line which is expected to kick in by 2H22, ...
Value, growth, and yield, with catalysts. EKH offers a decent upside of c36%. The potential rerating triggers are: i) the share currency conversion programme, due in September, ii) strong earnings growth (32.8% in 2021e and 8.8% CAGR over 2021-23e, driven by the global commodity price rally and EKH’s expansion plans), and iii) attractive dividends, paid in USD for all shareholders, yielding 6.1% in 2021e and 6.5% in 2022e. EKH trades on a 2022e EV/EBITDA of 4.9x, falling to 4.5x in 2023e vs. 8.0...
SALES, MARGINS, AND EARNINGS BOOM ON UREA PRICE RALLY MOPCO achieved a 2Q21 sales figure of EGP2,186 million (+9% QoQ, +12% YoY), primarily boosted by the ongoing rally in urea prices. Gross profit for the quarter hit EGP1,235 million (+19% QoQ, +43% YoY), implying a GPM of 56.5%. The healthy GPM could be also heavily attributed to the urea price rally, alongside modest levels of feedstock costs. The strong gross profit figure filtered down to the company’s EBITDA as It recorded EGP1,425 mill...
Commodity rally continues fueling positive earnings Egypt Kuwait Holding reported its 2Q21 consolidated results. 2Q21 revenue came in at USD186 million (-3%QoQ, +24%YoY), which was primarily owed to EKH’s fertilizers and petrochemicals segment which boasted a 27%YoY hike in revenues. Gross profit came in at USD 82.8 million (+6%QoQ, +42%YoY), which implies a GPM of 44.5%, versus the GPM of 40.6% achieved in 1Q21. Group EBITDA recorded USD 81.5 million (+5%QoQ, +33%YoY), implying a margin of 4...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
In this report we assess the average material prices for 2Q21 and depict the impact of pricing trends on the financial performance of the relevant listed equities in Egypt. Prices of raw materials in the food and beverages sector continued to normalize in 2Q21, except for prices of SMP and WMP. Accordingly, we expect a gradual recovery of margins to appear in the 3Q21 results of JUFO, EFID, DOMT and OLFIas price increases kick in and with seasonality of revenues. Most companies have an invent...
Value proposition in good industry times. MOPCO stock is up over 106% y-o-y, but still trades c67% less than the sector on a 2022e EV/EBITDA of 2.7x (P/E of 5.3x). It offers strong cash generation, with a 2022e FCFE yield of 10% (+12pp to 22% in 2023e even at USD280/t for urea c30% lower than spot), availing faster deleveraging (debt-free by end-2022) and DPS expansion; 2021e dividend yield of 6.6%, rising to 10.6% in 2022e. Our base case factors a EGP2.2bn deduction as the PV of deferred tax pa...
SALES SURGE AIDED BY UREA PRICES, NOTING SEQUENTIAL MARGIN PRESSURE MFPC released its consolidated financials for 1Q21. Sales recorded EGP1,996 million (+7%% Qo+11%YoY). We believe: 1) urea prices were the primal reason for the sequential hike in sales figure, given urea prices were up 29%QoQ and 43%YoY, 2) Volumes sold declined sequentially and yearly by 17% and 22%, respectively. Gross margin for the quarter came in at EGP1,038 implying a GPM of 52.0% vs 4Q20’s GPM of 51.9%, which cements o...
FERTILIZERS AND PETCHEMS LEAD SEQUENTIAL AND YEARLY GROWTH Egypt Kuwait Holding reported its 1Q21 consolidated results where revenue for the quarter came in at USD191 million (+31%QoQ, +19%YoY). The quarterly surge was principally driven by EKHO’s fertilizers and petrochemicals segment which grew by 63%QoQ, on the back of the rally in urea prices. Additionally, the company’s GP also witnessed a healthy expansion and recorded USD78.0 million (+44%QoQ, +38%YoY), implying a GPM of 40.6% (+4pps Q...
We present the 1Q21 material prices that are relevant to the petrochemical, consumer and industrial & materials sectors. In our 12-page report, we depict the impact of such changes on the financial performance of listed equities in Egypt. We also present the quarterly breakdown of each sector. Most companies have inventory of raw material that covers somewhere around 2-3 months. The increase in raw material costs is slowing down in 2Q21. Accordingly, we expect the pressure on margins to appe...
Nitrogen fertilizers endured – like many of its chemical peers – a tricky year in 2020 with regards to price fluctuations as markets around the globe learnt to adjust with the blitz of a global pandemic. Urea prices had flirted with lows of USD200/ton for a sizeable portion of 2020 before normalizing at the acceptable level of USD245/ton. Currently, most urea indices that we track are hovering around the very healthy levels of USD300-350/ton bolstered by I) Soaring grain prices that are drive...
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