Despite a better bottom
line, 4Q EBITDA was worse than expected
Adana Cement announced 4Q12 net profit of TRY18.6m (A-type shares), surpassing consensus’ TRY10.7m and our TRY5.5m. The difference comes from higher-than-expected income (TRY15.5m) from the sale of Cimsa shares (from 8.25% at end-3Q12 to 5.11% at end-4Q12). 4Q12 EBITDA of TRY6.8m was worse than the TRY8.7m consensus and our TRY15.5m.
Suffering from lower economies of scale and higher energy prices
EBITDA margin contracted significantly, from 26% in 4Q11 to 17% in 4Q12. Mediterranean domestic prices remained under excess-supply pressure throughout 2012, since last year’s exports to Syria were directed to the domestic market. Higher energy prices and lower economies of scale were the other reasons behind decreasing operational profitability.
Maintain BUY with 36% potential upside
We transfer coverage and lower our assumptions. Our 2013 EBITDA and net profit estimates decline 15% and 20%, respectively. Additionally, incorporating the positive impact of a 50bp risk-free rate cut to 7.5%, we cut our DCF-based TP from TRY5.82 to TRY5.50, indicating a still significant 36% upside. We maintain our BUY rating on Adana.
High div. yield, y-y improvement in 1Q13 are short-term triggers
Although management does not intend to distribute dividends over the majority (75%-plus) of the Cimsa [CIMSA TI] stake sale proceeds, we still anticipate a significant gross dividend yield of 7.2% (TRY0.29/share), probably in May. This, with a y-y improvement in 1Q13 operations (on favourable weather) from a low base may act as short-term triggers for the shares. An expected favourable domestic pricing environment and domestic market growth are likely to provide longer-term support. The stock has underperformed the ISE-100 by 37% since the start of the Syrian turmoil [March 2011]. Likely reconstruction in Syria once the turmoil ends represents potential upside for Adana Cement.
Adana Cement announced 4Q12 net profit of TRY18.6m (A-type shares), surpassing consensus’ TRY10.7m and our TRY5.5m. The difference comes from higher-than-expected income (TRY15.5m) from the sale of Cimsa shares (from 8.25% at end-3Q12 to 5.11% at end-4Q12). 4Q12 EBITDA of TRY6.8m was worse than the TRY8.7m consensus and our TRY15.5m.
Suffering from lower economies of scale and higher energy prices
EBITDA margin contracted significantly, from 26% in 4Q11 to 17% in 4Q12. Mediterranean domestic prices remained under excess-supply pressure throughout 2012, since last year’s exports to Syria were directed to the domestic market. Higher energy prices and lower economies of scale were the other reasons behind decreasing operational profitability.
Maintain BUY with 36% potential upside
We transfer coverage and lower our assumptions. Our 2013 EBITDA and net profit estimates decline 15% and 20%, respectively. Additionally, incorporating the positive impact of a 50bp risk-free rate cut to 7.5%, we cut our DCF-based TP from TRY5.82 to TRY5.50, indicating a still significant 36% upside. We maintain our BUY rating on Adana.
High div. yield, y-y improvement in 1Q13 are short-term triggers
Although management does not intend to distribute dividends over the majority (75%-plus) of the Cimsa [CIMSA TI] stake sale proceeds, we still anticipate a significant gross dividend yield of 7.2% (TRY0.29/share), probably in May. This, with a y-y improvement in 1Q13 operations (on favourable weather) from a low base may act as short-term triggers for the shares. An expected favourable domestic pricing environment and domestic market growth are likely to provide longer-term support. The stock has underperformed the ISE-100 by 37% since the start of the Syrian turmoil [March 2011]. Likely reconstruction in Syria once the turmoil ends represents potential upside for Adana Cement.
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