Cairo – Mubasher: MubasherTrade has downgraded their recommendation for Cairo Poultry company Hold/Moderate Risk, while maintaining price target (PT) at EGP 10.43 per share, according to a recent report on Sunday.

Cairo Poultry is projected to achieve better cost pass-through ability and slight enhancement in operating margins and profitability in 2018, according to the report.

The Egyptian company’s financial results in 2017 confirms MubasherTrade’s positive view on the stock driven by “market leadership, business integration and lucrative market with significant growth potentials.”

Cairo Poultry’s gross profit grew 34% year-on-year to EGP 1.12 billion in 2017, coming in line with MubasherTrade Research's estimates (MTRe) of EGP 1.17 billion.

Gross processing margin (GPM) fell to 26.0% year-on-year in 2017, versus 31.5%, compared to MTRe of 27.2%, “reflecting the devaluation of EGP, where c. 80% of the company's cost is denominated in foreign exchange”.

Gross profit rose 8% year-on-year, implying gross profit margin of 26.2% for the fourth quarter of 2017, compared to 35.5% in Q4-16, missing MTRe at 31.4%, the report added.

Cairo Poultry reported a 38% year-on-year surge in 2017's earnings to EGP359.8 million, missing MTRe of EGP 442.4 million by 19% on higher than expected depreciation expense, while Revenues hiked 63% to EGP 4.32 billion, in line with MTRe of EGP4.28bn.

“The growth in revenues was driven by 50% year-on-year growth in poultry segment's revenues to EGP2.59bn, which is the largest contributor to revenues by 60%,” the report continued.

The company’s earnings fell 57% year-on-year to EGP 49.10 million in Q4-17, driven by the base effect, where Cairo Poultry booked EGP 128.47 million of forex gains in Q4-16, against loss of EGP 1.73 million in Q4-17, missing MTRe of EGP 132.1 million, the report indicated.

Cairo Poultry's sales grew by 36% year-on-year to EGP 614.32 million in Q4-17, contributing 57% of the top line, compared to 61% in Q4-16 due to the “fierce competition” in this segment, the report concluded.