Initiation of Coverage
Recommendation: BUY
Deep
in value
· Providing exposure to the automotive sector… Parsan is a
forging and machining company with sizeable exports (60%), providing products
for various sectors mainly automotive (70%). Parsan has modern flexible
manufacturing equipment and significant know-how and hence superior quality,
which are the main reasons behind good and long lasting relations with the
clients and its higher margins.
· Initiating with a BUY rating and an upside potential of 79%... Our conservative valuation for Parsan offers a huge upside for the stock. There is room for margin improvement for the company and the DCF analysis yields much higher values for the stock. Adjusting for the Asil Celik (using our valuation at 6.0x 2011 EV/EBITDA), Parsan trades at an adj. EV/EBITDA of 2.5x. Considering the expectation of Asil Celik doubling its capacity, forward looking multiples should be much lower.