Alert on Q3 2013 – Downgrading El Sewedy to REDUCE as rise in earnings doesn’t justify surge in price

El Sewedy reported a 6% y-o-y rise in Q3 revenues to EGP 3.5 billion as a result of a 10% increase in the wire and cables segment to EGP 2.8 billion on higher volumes and average selling prices. Moreover, Q3 gross profit increased by 5% y-o-y backed by robust income from cables, electrical products, and transformers segments, leading to an impressive 32% surge in the company’s bottom-line. Despite El Sewedy’s improving fundamentals, we lower our rating to REDUCE as the company’s stock price registered a striking rally in the past six months, surging by more than 77% as encouraging economic news and easing political tensions lifted investors’ sentiment. With El Sewedy trading near its two-and-a-half year high, we expect a near-term pullback as this could be a considerable opportunity for profit taking.

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El Sewedy Electric – 2013 Q3 Update

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