Cairo – Mubasher: Pharos Research has raised their target fair value (FV) for Eastern Co to EGP 500, maintain the Equalweight recommendation, according to a recent report.

The research company has adjusted their model based on Eastern Co’s new pricing scheme, in addition to the sin tax, which is set to be implemented by the end of 2018 in accordance with Egypt’s new healthcare law.

Increased tax will positively impact the tobacco company’s profits, Pharos said, forecasting revenues to surge 13% in fiscal year 2017/2018, with a compound annual growth rate (CAGR) of 12% over the period from FY17/18 to FY21/22.

Eastern Co’s earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to settle between 31% and 33% in FY17/18, the report indicated.

 “Egypt’s 61 billion local brand cigarettes volume, all produced by Eastern Co, highly covers market needs. We expect volumes to grow in coherence with population rise. Tobacco consumption is highly resilient, despite inflation and purchasing power pressure,” the report added.

In November, Eastern Co on announced the new prices of its products after applying the value-added tax.

Egypt’s finance minister previously said that applying VAT on tobacco will boost total tax allocation for fiscal year 2017/2018 by EGP 4 billion.

Eastern Co had posted a net profit of EGP 1.04 billion in the three-month ended September 2017, up from EGP 427.3 million in the prior-year period.

By 1:18 pm Cairo time, Eastern Co’s stock gained 2.19% at EGP 435.