reports
- Ahmed Soliman
Egypt steel producers | Industry dynamics deteriorate; Proposed share ...
Negative domestic, global industry dynamics continue to unfold. Domestic steel demand has been falling since Nov-16 (2019e demand is 16.5% below pre-float levels). Globally, iron ore prices started to normalise as anticipated, but there are strong signals that steel prices could follow (Aug-19 steel price composite down to USD575/t, the lowest in nearly two years), amid global trade tensions and potential slowdown. We assume full protectionism of the domestic market, but there is a risk of an ad...
- Ahmed Soliman
Egypt steel producers | Downgrade to Underweight on rising materials c...
A bear steel cycle is becoming more evident. Vale’s (the largest global iron ore producer) Brazil mine crisis on 25 Jan led global iron ore prices to soar by 20% over Jan-Mar 2019. However, global steel prices did not follow suit amid unsupportive demand. The World Steel Association sees global steel demand growth weakening to 1.4% in 2019 vs. 4.3% in 2018 and 2% in 2017. The IMF forecasts China (c50% of global consumption)’s real GDP growth to drop to 6.2% in 2019 vs. 6.6% in 2018. Protectionis...
- Ahmed Soliman
Upgrade to Neutral on valuation; Global steel cycle a key watch factor
Raise TP by 5.5% to EGP19.0/share on DCF roll-over. We upgrade our rating to Neutral, following the 25.7% share price drop since our last note, published in Mar-18. Ezz Steel trades on a 2019e proportionate EV/EBITDA of 5.8x, dropping to 5.2x in 2020e, in line with global peers, which we find justified, given Egypt’s high capital costs, and Ezz Steel’s 2019-21e EBITDA CAGR of 7.1%, above the peers average of 1.4%. WC spending means deleveraging is a long-term story. We estimate WC spending in 2...
- Ahmed Soliman
Egypt natural gas outlook | Sector developments reconfirm long-term de...
Maintain expectation of a sustained long-term gas deficit. We cut our demand estimates by 4-7% over 2018-21, mainly due to the impact of global externalities (higher oil prices and capital outflows from EM economies), on economic growth and gas demand. We hold our supply and pricing forecasts roughly unchanged. We also maintain our view that Egypt will remain a gas deficit nation beyond 2020e, despite the drastic supply improvement – Egypt’s natural gas supply should grow at a 2017-20e CAGR of 1...
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