reports
- Rita Guindy
Upgrade to Neutral following EGP floatation
Margin windfall from EGP float largely offsets feedstock price increase. Sidpec is a beneficiary of a weaker EGP as all of its top line is in USD (or its equivalent), while c20-30% of costs are in EGP. We raise our 2017 EPS and EBITDA estimates by 21% and 18% (despite 20% labour cost inflation), respectively. This rise is due to higher USD:EGP rate estimates, which raises our 12-month TP by 26% to EGP14.5/share. The revised TP implies 9% upside; therefore we upgrade our rating to Neutral from Un...
- Rita Guindy
Downgrade to Underweight on unjustified rally
Rally lacks fundamental catalysts. The stock’s 1M outperformance (21% vs. EGX30), is mainly due to anticipated gains from EGP-flotation, news that the state IPO programme will include a secondary offering in Sidpec, and also as the company previously announced that it is studying the feasibility of a polypropylene (PP) plant and/or an MDF plant. No details on either of these projects were disclosed though, and it is therefore too early to assume value accretion. We raise our 12-month target pric...
- Salma KHARBACHI
Egypt’s austerity plan is a real dose of oxygen
In 2016, Sidi Kerir Petrochemicals realized a Net profit of EGP920.8m, up by 9.3% a year earlier. 2016 revenue increased by 12.7% to EGP3.142bn. The firm targets net profits of EGP823.1m in 2017, and eyes sales revenues of EGP4.5bn in 2017, up by 43%, y-o-y, while it expects the sales cost to increase by 78.5% to EGP3.48bn. The board of SIDPEC has approved the investment budget for the new fiscal year 2017-2018.
- Rita Guindy
Clouded visibility; downgrade to Underweight
Repeated feedstock price revisions cloud margin visibility. 3Q16 is the second time Sidpec’s feedstock contract gets revised after industry-wide price hikes took place in 2014. This comes despite the company’s contract stipulating a review every 3 years, and the next one should have been due in 2017. We cut our 2017 EPS and EBITDA estimates by 10% and 6% on higher feedstock prices, and our 12- month target price by 23% to EGP11.5/share. The revised TP implies 11% downside and we therefore downgr...
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