Elsewedy Electric
SWDY
SWDY
NBK Capital issued a report on El Sewedy Electric maintaining its fair value at EGP 38.0 per share and reinstating its Hold recommendation on the stock.
“El Sewedy Electric reported 2Q2014 revenue of EGP 4.17 billion (+2% YoY and -4% QoQ), in line with our forecast of EGP 4.15 billion. Revenue for the cable segment (which represents over 75% of total revenue) grew 3% YoY but declined 6% QoQ. As for the turnkey segment, topline decreased 4% YoY and 7% QoQ,” said NBK Capital.
The company realized a GP per ton of EGP 8,700 (compared to EGP 7,500 in 1Q2014 as well as 2Q2013), much higher than our forecast of EGP 7,000. Overall this resulted in 10% YoY increase in gross profit for the cable segment. The performance of the turnkey segment remained volatile and the gross profit dropped 38% YoY and 16% QoQ. Thus, EBITDA (excluding other income/expenses) dropped 7% YoY to EGP 477 million but was still 10% above our forecast. Accordingly, EBITDA margin declined 110 bps YoY to 11.5% but came in higher than our forecast of 10.5% for the quarter, according to the report issuer.
The company reported a net profit of EGP 110 million (+34% YoY) in 2Q2014 supported by lower finance charges, forex gains and reversal of provisions. The company also recorded an impairment charge of EGP 132 million related to its operations in Yemen. Excluding this and adjusting for 2Q2013 impairment charge of EGP 95 million related to Syrian operations, net profit would still have grown by 37% YoY.
Net debt increased 4% QoQ to EGP 3.33 billion mainly due to higher inventories with net debt to equity remaining flat at 59%.
“Overall, a decent set of results but maintaining the momentum in profitability is the key. SWDY continues to enjoy strong growth prospects in Algeria, Qatar and Saudi Arabia along with some incremental pick up in local sales. GP per ton for the cable segment has already improved by 23% YoY to EGP 8,100 in 1H2014 compared to management guidance of around +10% YoY for FY2014 (to c. EGP 7,150). Therefore, we need to ascertain the sustainability of this improvement,” said NBK Capital, “On the other hand, the volatile performance of the turnkey segment is a setback. Given that SWDY had previously announced being selected as the primary contractor to develop six wind energy farms in Egypt, we feel this downward trend for the segment could reverse once the project picks up. However, we cannot quantify the impact of the deal due to a lack of clarity on the matter (deal size, timeline etc…). Management will host a conference call this Wednesday and we will look forward to get better visibility on near-term business outlook.”
“El Sewedy Electric reported 2Q2014 revenue of EGP 4.17 billion (+2% YoY and -4% QoQ), in line with our forecast of EGP 4.15 billion. Revenue for the cable segment (which represents over 75% of total revenue) grew 3% YoY but declined 6% QoQ. As for the turnkey segment, topline decreased 4% YoY and 7% QoQ,” said NBK Capital.
The company realized a GP per ton of EGP 8,700 (compared to EGP 7,500 in 1Q2014 as well as 2Q2013), much higher than our forecast of EGP 7,000. Overall this resulted in 10% YoY increase in gross profit for the cable segment. The performance of the turnkey segment remained volatile and the gross profit dropped 38% YoY and 16% QoQ. Thus, EBITDA (excluding other income/expenses) dropped 7% YoY to EGP 477 million but was still 10% above our forecast. Accordingly, EBITDA margin declined 110 bps YoY to 11.5% but came in higher than our forecast of 10.5% for the quarter, according to the report issuer.
The company reported a net profit of EGP 110 million (+34% YoY) in 2Q2014 supported by lower finance charges, forex gains and reversal of provisions. The company also recorded an impairment charge of EGP 132 million related to its operations in Yemen. Excluding this and adjusting for 2Q2013 impairment charge of EGP 95 million related to Syrian operations, net profit would still have grown by 37% YoY.
Net debt increased 4% QoQ to EGP 3.33 billion mainly due to higher inventories with net debt to equity remaining flat at 59%.
“Overall, a decent set of results but maintaining the momentum in profitability is the key. SWDY continues to enjoy strong growth prospects in Algeria, Qatar and Saudi Arabia along with some incremental pick up in local sales. GP per ton for the cable segment has already improved by 23% YoY to EGP 8,100 in 1H2014 compared to management guidance of around +10% YoY for FY2014 (to c. EGP 7,150). Therefore, we need to ascertain the sustainability of this improvement,” said NBK Capital, “On the other hand, the volatile performance of the turnkey segment is a setback. Given that SWDY had previously announced being selected as the primary contractor to develop six wind energy farms in Egypt, we feel this downward trend for the segment could reverse once the project picks up. However, we cannot quantify the impact of the deal due to a lack of clarity on the matter (deal size, timeline etc…). Management will host a conference call this Wednesday and we will look forward to get better visibility on near-term business outlook.”
Source:
Mubasher
