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Pharos Research maintains Delta Sugar fair value, recommends ‘Overweight’ - Daily News Egypt

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Pharos Research maintains Delta Sugar fair value, recommends ‘Overweight’

Prime Research expects Porto Group profit to hit EGP 296 million during 2017

Pharos Research issued a research note setting the fair value (FV) of Delta Sugar at EGP 36.43 per share, with an “Overweight” recommendation.

Delta Sugar’s revenues rose 78.7% quarter-on-quarter and 95.9% year-on-year in the second quarter of 2017.

Volume recovery grew 5.6% year-on-year during Q2 2017, and Pharos updated the volume decline to 20.8%, which is higher than its forecasted decline of 36.8%.

“Delta Sugar is trading at a price-earnings ratio (P/E) of 6.5x and 7.1x for 2017 and 2018, respectively,” Pharos Research said, adding that “comparative valuation implies that [the stock] should be priced at EGP 44.70/share.”

Pharos noted that the firm’s stock is facing some obstacles due to the drop in international sugar prices, which will lower Delta Sugar’s prices and depreciate the Egyptian pound, as well as profit margins.

“Moreover, sugar producers in Egypt have been focusing on exports to obtain foreign currency, while ‘the government is taxing sugar exporters EGP 3,000 per metric tonne to incentivise them to sell locally instead,’ in order to close the current supply gap,” the research company concluded.

Meanwhile, Porto Group Holding is expected to generate profits of EGP 296 million during 2017, according to a report by Prime Research.

Prime Research forecast Porto Group’s revenues to hit EGP 2.2 billion in 2017, noting that the company’s performance in 2017 was compatible with Prime Research’s expectations, recommending the company to keep the fair value (FV) at EGP 0.42.

Porto Group achieved profits of EGP 99.5 million in the three months that ended June 2017, from EGP 15.6 million in the same period last year.

Similarly, revenues rose to EGP 809.06 million in the second quarter of 2017, compared to EGP 230.8 million in Q2 2016.

The financial results of Porto Group had previously shown that consolidated profits amounted to EGP 117.5 million.

A separate research note issued by Pharos expected Elsewedy Electric to enter new markets in Europe and Latin America to compensate for the decreased demand for wires and cables in the GCC states, according to a report by Pharos Research.

The Egyptian firm is aiming to expand across all segments as it maintained capital expenditure of EGP 900 million for fiscal year 2017.

“Elsewedy Electric is now better positioned to compete with rivals, thanks to the Egyptian pound’s flotation,” Pharos Research said.

The company is seeking to grow a backlog of EGP 32.2 billion by 2019, as the company is pursuing to compete for power generation awards in Africa and the GCC.

The company is targeting “turnkey revenue of EGP 17 billion in FY17, and turnkey margins to range between 17% and 18% in FY17, and to decline to 16% going forward post the completion of fast track projects,” the report added.

The manufacturing firm is expecting the smart metres’ growth to be driven by demand in Egypt and the GCC, Pharos stated, noting that wires and cables gross processing margin (GPM) will range between 16% and 17% in FY17 as the company depletes cheap inventory.

The firm’s internal generated funds will be used to finance working capital, in order to minimise its current debt level of EGP 9.9 billion.

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