A recent report issued by Pharos Research expects Al Ezz Dekheila Steel Co to achieve a net income of EGP 2.1bn in fiscal year (FY) 2018 and gross processing margins (GPM) to hover around 15.7%.
The research firm has reiterated its overweight recommendation on the company’s stock at a fair value (FV) of EGP 1,000 per share.
Al Ezz Dekheila Steel is currently trading at FY18 price/earnings ratio of 6.8 times and FY 18 earnings before interest, taxes, depreciation and amortization (EBITDA) of 5 times, the research firm said.
The board of the industrial conglomerate has proposed a EGP 668.2m cash dividend to shareholders for 2017.
Al Ezz Dekheila Steel reported a 72% year-over-year decline in profits for 2017, registering EGP 362.4m last year, down from EGP 1.3bn in 2016.
Sales grew to EGP 34.37bn in 2017, versus EGP 16.9bn a year earlier.
Al Ezz Dekheila Steel’s capital amounts to EGP 1.33bn distributed over 13.3m shares at a par value of EGP 100 per share.
Meanwhile, most of the research houses said that EGX-listed companies whose cost of debt is high will benefit the most from the CBE’s decision to cut interest rates, citing GB Auto, Ezz Steel, Palm Hills, Talaat Mostafa Group (TMG), Juhayna, and Domty as those with the biggest gains from the rate cut.
Ezz Steel is also likely to benefit most from the easing cycle, with the interest rates cut expected to positively affect financial performance, particularly in terms of reducing interest on debt, noted Prime Holding, indicating that around 50% of Ezz Steel’s debt is in Egyptian pounds, estimated at around EGP 24m.
Ezz Steel last reported a 16.3% year-over-year drop in losses to EGP 107m in the third quarter of 2017 on the back of sales growth, compared to EGP 127.9m in the prior year.
In terms of sectors badly affected by the rate cut, the banking sector will be the most negatively affected by the CBE’s decision, as banks that have given out loans at higher interest rates will now see these loans repaid at lower interest rates, the head of research at El Marwa for Securities Brokerage, Mohamed El-Naggar, wrote in a research note.
The Egyptian food and beverage sector, however, will benefit the most from the rate cut, according to the analyst.
Meanwhile, Mubasher Trade noted in a recent research note that 11 EGX-listed stocks will benefit from the decision, indicating that along with Ezz Steel, GB Auto, TMG, and Palm Hills, Global Telecom, Citadel Capital, Orange, Elsewedy Electric, Maridive and Oil Services, and Telecom Egypt will also see benefits.
The real estate sector will benefit the most from the rate cut, according to the note.
In another research note, Pharos Research has maintained an overweight recommendation on Orascom Development Egypt’s stock at a fair value (FV) of EGP 35 per share.
The rating was mostly driven by the 21m sqm residual land located in El Gouna, on which hotels and real estate projects will be constructed, the research firm highlighted in a recent report on Thursday.
Orascom Development reported turning to profitability during 2017 with a net profit of EGP 391.9m, against a net loss of EGP 499.4m in 2016.
The Egypt-listed firm’s revenues grew to EGP 2.6bn last year from EGP 1.455bn in 2016.
Standalone losses shrank to EGP 8.12m in 2017 from EGP 181.8m a year earlier.