EFG-Hermes said in a report that Sidi Kerir Petrochemicals Co.’s (Sidpec) Q3-13 financial results, which showed net income of EGP323 million, down 6% compared to Q2-13, was 13% ahead of its EGP287 million forecast.
While the company showed a moderate improvement compared to a quarter earlier on the gross profit level, its bottom line likely dropped on lower other income and some FX losses in Q3-13, EFG said, adding that higher taxes Q-o-Q further pressured Q3-13’s bottom line.
“Overall, while the results surprised our expectations positively, Sidpec’s stock price has already rallied strongly YTD (total return of 33% YTD) and we believe the solid set of earnings is priced in at the current levels, thus we maintain our Neutral rating,” the report issuer stated.
It added that, on the operational level, revenues of EGP767 million, beating expectations by 9% and were up 3% compared to Q2-13 on the back of an improvement in HDPE and LLDPE prices, which averaged c5% higher Q-o-Q. Gross profit rallied 10% Q-o-Q to EGP444 million, driven by improved prices and margins and was 15% ahead of estimate.
The key positive take away from the results was that the company was able to maintain high operating rates and saw essentially no effect to their sales volume despite the country-wide unrest in Egypt and the imposition of curfews during the quarter. In addition, the company was able to maintain their pricing leverage in the local market despite the weakened demand for the quarter, EFG pointed out.
“This reinforces our view that Sidpec is among the most defensive and low risk plays within the Egyptian market, given its consistently strong operations and lack of devaluation risk,” it concluded.