Cairo – Mubasher: Pharos Research has maintained the fair value (FV) of Juhayna Food Industries at EGP 8.88 per share, with an "Equalweight" recommendation.

The research firm forecasts Juhayna’s purchasing power to gradually improve and go forward on the back of expectations of a stronger Egyptian pound.

Juhayna’s bottom-line soared 139% quarter-on-quarter, backed by higher gross margin and the company’s focus on raising cost efficiencies and running a leaner enterprise.

Pricing and higher revenues, particularly of the higher margin juice segment boosted gross margin by 220 basis points (bps), Pharos added.

“Selling, general and administrative expense (SG&A) declined by 130bps as a percentage of revenue leading to a 300 bps expansion in earnings before interest, taxes, depreciation and amortization (EBITDA) margin despite a EGP 22 million severance cost,” the research firm noted.

In addition, net interest expense remained relatively stable during in the third quarter of 2017, as Juhayna’s debt levels were reduced by 15.2%.

Top line rose 7% quarter-on-quarter and 30.8% year-on-year, bolstered by the juice and dairy segments.

Juhayna’s yogurt production fell 22.9% quarter-on-quarter on seasonal factors, Pharos noted.

“There has been a slight recovery in the market,” according to Juhayna’s management.

Juhayna improved its working capital position in Q3-17, allowing it to cut total debt by 15.2% Quarter-on-quarter.

“Net debt to equity currently stands at 0.8x as of 3Q-17, versus 1.0x in 2Q-17,” Pharos indicated.