We maintain an ACCUMULATE rating on Ezz steel, revising our target price up to EGP 19.78 per share on easing levels of political tensions and economic uncertainties. Revenues increased by 7.7% y-o-y to reach EGP 15.98 billion up to September 2013, supported by strong sales volumes and average selling prices. Moreover, Ezz production costs dropped to 88.4% of sales during the first nine months of 2013 from 91.6% a year earlier, driving the company’s gross profit by 48.7% up to EGP 1.8 billion with a gross margin of 11.6%. Earnings followed suit, jumping to EGP 218 million from a loss of EGP 46 million recorded a year earlier, additionally lifted by higher non-operating revenues, forex gains, and interest income despite the rise in SG&A expenses and borrowing costs.
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Ezz Steel – 2013 Q3 Update