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KORDSA 1Q19  Earnings Update (Outperform rating maintained)

Results are broadly in line with forecasts Kordsa posted TL93mn net profit (+52% y/y, +170% q/q) for 1Q19, close to…

KORDSA 1Q19  Earnings Update (Outperform rating maintained)

Results are broadly in line with forecasts

Kordsa posted TL93mn net profit (+52% y/y, +170% q/q) for 1Q19, close to the consensus estimate of TL98mn (our estimate: TL88m). EBITDA of TL198mn was also broadly in line with the consensus of TL191mn (our estimate: TL187mn).

Profitability continued to grow strongly in the quarter

Revenues and EBITDA increased by 77% and 65% y/y, respectively, which benefited from the strengthening in hard currencies against local currencies, together with some contribution from the recently acquired composite companies in the US. On the other hand, higher depreciation and financial expenses resulted in a relatively more limited bottom line growth of 52% y/y. On a q/q basis, EBITDA and net profit were up by 54% and 170%, respectively, as earnings were hit by plant stoppages and unfavorable FX impact in 4Q18.

Net debt/EBITDA retreated to 2.0x

Working capital requirement rose by 6% q/q to TL1.38bn largely related with currency effect. However, net debt remained flat thanks to the strong EBITDA generation and net debt/EBITDA retreated from 2.2x to 2.0x. We expect the same ratio to continue gradually declining in the upcoming quarters.

Outperform rating maintained, TP revised up to TL14.84/share

We raised our 2019 revenue and EBITDA forecasts by 8% and 6%, respectively, which are still at the low end of the company guidance of 30-40% y/y growth. Please also note that the company guidance excludes any contribution from Axiom Materials which was acquired in February 2019 for USD175mn. Kordsa shares trade at 4.5x EV/EBITDA and 5.8x P/E multiples on our 2019 forecasts, which we find undemanding. Our revised target price of TL14.84/share (previously TL14.00/share) implies 24% upside potential from current levels. We maintain our Outperform rating. We think that Kordsa is very well positioned in the current volatile macro environment with very limited Turkey exposure (2% of consolidated sales) and USD based sales.

 

Umut Ozturk / Research Director, OYAK Invest

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