Trakya Cam 2Q12 earnings review: Lower margins spell lower bottom line
Trakya Cam posted a TRY 38.1mn net profit in 2Q12, slightly below our
estimate of TRY 42.6mn, but slightly higher than the consensus figure of TRY
35.9mn. The deviation between our bottom line estimate and actual figures
stemmed from lower margins than our expectation.
On the top line front, revenues came in at TRY 324.7mn, which is
slightly below our TRY 346.8mn estimate and above than consensus TRY 312.3mn
estimate. The price hikes in Turkey (we estimate a 6-8% upward price adjustment
in 2Q) and in Russia (7-9% upward price adjustment in 2Q) boosted sales
quarterly, up by 12.2%, despite the figure remaining stable y/y. The weak 1H12
performance of the company’s end markets, namely the construction and auto
sectors limited revenue growth in 1H12, although we expect a better performance
in 2H12.
The gross margin improved to 29.5% in 2Q12 from 28.4% in 1Q12, while the
EBITDA margin rose to 20.8% from 17.5% quarterly, thus below our expectation of
22.3% and the market consensus of 23.2%. Although the margins were lower than
our expectation, we view the quarterly margin improvement as slightly positive.
Natural gas prices have risen by 18% effective as of April 2012, and these
constitute 35% of total COGS for the company, which improved its EBITDA margin
by 330bps q/q in 2Q12. For the remainder of year, we expect cost pressures to
be lifted and expect further improvements in 2H12.
Overall, we view the financials as neutral for the share price. All in all, we believe company’s strong mid-term
story and maintain our “Buy” recommendation with a TRY 2.68 target
price.
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