Weak operating performance
on low gold production
In 3Q12, the company posted TRY139.3m net income, below our estimate (TRY152.6m) due to weaker than expected operating performance. Posted EBITDA (TRY177.5m) was below our estimate (TRY192.6m) on lower than expected production due to the decline in the grade of processed ores. Consensus net income was TRY150.4m and EBITDA was TRY192.1m.
Remarkable decline in ore grade was the major reason
Despite the decline in ore grade and production volume, cash costs remained at USD350/oz thanks to low exploration costs, which were down 67% q-q. Hence, EBITDA margin increased by 0.6ppt q-q to 79.3%. We expect total production volume to remain at 335,000 ounces, below our initial estimate of 345,000 ounces.
Raise our TP 7% to TRY47.97 on improved outlook for gold prices
We slightly cut our production estimates by 2% for 2013 and 2014. Our EBITDA and net income estimates change slightly. Our target price is based on a blended valuation, assigning 75/25 weights to DCF and peers. Apart from risks arising from gold price and USD/TRY, operational and regulatory risks are significantly high in the mining industry
Despite a strong performance, stock still offers decent upside
We remain positive on the company as we project a CAGR of 11% in gold production to 502,000 oz by 2016 thanks three new mine projects (Diyadin, Himmetdede and Sogut), which will become fully operational in 2014, 2015 and 2016, respectively.
In 3Q12, the company posted TRY139.3m net income, below our estimate (TRY152.6m) due to weaker than expected operating performance. Posted EBITDA (TRY177.5m) was below our estimate (TRY192.6m) on lower than expected production due to the decline in the grade of processed ores. Consensus net income was TRY150.4m and EBITDA was TRY192.1m.
Remarkable decline in ore grade was the major reason
Despite the decline in ore grade and production volume, cash costs remained at USD350/oz thanks to low exploration costs, which were down 67% q-q. Hence, EBITDA margin increased by 0.6ppt q-q to 79.3%. We expect total production volume to remain at 335,000 ounces, below our initial estimate of 345,000 ounces.
Raise our TP 7% to TRY47.97 on improved outlook for gold prices
We slightly cut our production estimates by 2% for 2013 and 2014. Our EBITDA and net income estimates change slightly. Our target price is based on a blended valuation, assigning 75/25 weights to DCF and peers. Apart from risks arising from gold price and USD/TRY, operational and regulatory risks are significantly high in the mining industry
Despite a strong performance, stock still offers decent upside
We remain positive on the company as we project a CAGR of 11% in gold production to 502,000 oz by 2016 thanks three new mine projects (Diyadin, Himmetdede and Sogut), which will become fully operational in 2014, 2015 and 2016, respectively.
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