4Q12 net profit one-third
of 4Q11, and EBITDA half
Mardin Cimento announced 4Q12 net profit of TRY9m, almost one third of 4Q11’s TRY26m. Realization was in line with our estimate, but below the consensus estimate of TRY13m. 4Q12 net sales realized at TRY52m, a 20% y-y decline. EBITDA (halved y-y to TRY14m) was above our TRY10m estimate, but was broadly in line with the TRY15m consensus.
Heavy competition from Iran was the cause
Domestic sales rose 12% y-y to TRY33m, thanks to strong demand in Southeast Turkey (14% y-y growth in 4Q12 on TCMA data). Exports declined 37% y-y to TRY22m, due to heavy competition from new capacity in Iran, which also put downward pressure on domestic prices. As a result, EBITDA margin contracted to 26.1% in 4Q12, from 41.5% in 4Q11.
Our new TP of TRY5.04 indicates only 4% downside potential
We transfer coverage of Mardin to Berna Koktener, from Ozgur Guler. We use DCF with a 7.5% risk-free rate (8% previously) to derive our TP of TRY5.04 (TRY4.79 previously). A deterioration in the macro economy is the main downside risk, while stronger-than-estimated domestic demand and easing competition in export markets are the main upside risks.
Mardin Cimento announced 4Q12 net profit of TRY9m, almost one third of 4Q11’s TRY26m. Realization was in line with our estimate, but below the consensus estimate of TRY13m. 4Q12 net sales realized at TRY52m, a 20% y-y decline. EBITDA (halved y-y to TRY14m) was above our TRY10m estimate, but was broadly in line with the TRY15m consensus.
Heavy competition from Iran was the cause
Domestic sales rose 12% y-y to TRY33m, thanks to strong demand in Southeast Turkey (14% y-y growth in 4Q12 on TCMA data). Exports declined 37% y-y to TRY22m, due to heavy competition from new capacity in Iran, which also put downward pressure on domestic prices. As a result, EBITDA margin contracted to 26.1% in 4Q12, from 41.5% in 4Q11.
Our new TP of TRY5.04 indicates only 4% downside potential
We transfer coverage of Mardin to Berna Koktener, from Ozgur Guler. We use DCF with a 7.5% risk-free rate (8% previously) to derive our TP of TRY5.04 (TRY4.79 previously). A deterioration in the macro economy is the main downside risk, while stronger-than-estimated domestic demand and easing competition in export markets are the main upside risks.
Underperformed 35% in the past 12 months; upgrade to HOLD
The company’s board will propose a TRY0.3089/share dividend from 2012 earnings, to be distributed on 31 May 2013. The amount corresponds to a 5.9% yield. Following severe deteriorations in 2012, we foresee moderate growth rates for both EBITDA and net income in 2013 at 8% and 5%, respectively, as we do not expect further export market-related worsening. The stock has underperformed the ISE-100 35% in the last 12 months and 7% in the last week. Our target price for the stock offers only 4% downside potential from current levels. Since the valuation is no longer stretched, we upgrade our recommendation for Mardin from Reduce to HOLD.
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