We maintain our ACCUMULATE rating on El Sewedy Electric, revising our target price to EGP 45.14 per share on ongoing impressive operational and financial performance. Our last recommendation in September expected El Sewedy to benefit from improving operations and rebounding confidence in the Egyptian market. Our expectations came in line with the company’s strong fundamental indicators and El Sewedy’s shares rallied to their highest level in more than 4 years after breaking our target price of EGP 46.23 in September. However, worries over additional drops in oil prices dragged the Egyptian stock market, negatively affecting El Sewedy’s shares performance. Although Egypt is a net importer of oil products and should take advantage from the declining trend of prices, Egyptian equities are mirroring the global downward trend as the panic is spilling over to all markets. Yet, we maintain our favorable rating on El Sewedy as we believe the company has strong operations and will keep on registering outstanding financial results.
El Sewedy’s revenues increased by 14% y-o-y to reach EGP 12.8 billion up to September 2014 as all major divisions recorded outstanding results. Similarly, earnings rallied by 63.1% to EGP 310 million, further supported by lower finance charges in addition to higher operating and finance income. Going forward, we estimate 2014 net profit to reach EGP 293 million on persistent solid operations in core markets.
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El Sewedy Electric – 2014 Q3 Update