Market Entry Costs, Producer Heterogeneity, and Export Dynamics
Investment case A leading regional steel producer, with a market share of 40% in local market.
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Investment case • A leading regional steel producer, with a market share of 40% in local market. • ESRS plans to expand locally to enhance margins and to meet local market needs. ESRS has long term plans to produce 1.3 mtpa of Direct Reduced Iron by late 2011. • The company is vulnerable to international steel prices, yet local resilient construction activity maintains full utilization of long products capacities. • Backlogs of construction contracts will be completed over the coming 3-4 years, and will absorb local steel production. Downside Risks • A local political and economic situation that has a negative impact on the demand for new real estate units. • Furthermore, the company may witness an increasing number of cancellations • A regional and local political issue that has a negative impact on the tourism industry • Economic crises affected negatively Ezz flat steel sales - mostly directed to export markets • ESRS plans to expand its final product capacity by mid 2012 to produce either long or flat products with a total capacity amounting to 1,200 tons per annum Ezz Steel Rebars Company Profile Ezz Steel is a joint-stock company established in April 1994 to manufacture steel rebars. ESRS' facilities in Sadat and 10th of Ramadan have a combined production capacity of 1.4mn tons per annum. Furthermore, ESRS owns 63.1% directly and indirectly of Al-Ezz Flat Steel (EFS), with a capacity is 1.3mn tons of flat steel per annum, most of which is directed to export markets. ESRS also owns a 55% stake in Al-Ezz Dekheila for Steel- Alexandria (EZDK), which is the largest integrated steel plant in Egypt, with an annual production capacity of 1.78mn tons of long products and 1mn tons of flat products. Shareholder Structure • Ezz Group Holding 64.6% • Free Float 35.09% • Banks, Insurance Companies, & Others 0.31% 52-Week Performance & Share Data (*EGX suspended 27 th Jan – 23 rd Mar 2011) ESRS.CA/ESRS EY |Sell Recommendation | Moderate Risk | LTFV EGP18.4 | Target Price EGP12 | Analyst: Hany Samy Key Performance Indicators EG P m n/FY E D ecem ber 2007a 2008a 2009a 2010a 2011e 2012e R evenue 16,159.4 21,843.1 12,589.3 15,224.9 13,564.2 15,267.0 G rowth R ate (% ) 38.8 35.2 -42.4 20.9 -10.9 12.6 EB ITD A 3,936.9 4,438.8 1,635.9 2,203.6 1,815.1 2,054.2 G rowth R ate (% ) 9.9 12.7 -63.1 34.7 -17.6 13.2 EB ITD A m argin (% ) 24.4 20.3 13.0 14.5 13.4 13.5 NetIncom e 1,122.0 1,244.6 88.1 326.5 136.3 273.9 G rowth R ate (% ) 12.8 10.9 -92.9 n/m -58.2 100.9 N etm argin (% ) 6.9% 5.7% 0.7% 2.1% 1.0% 1.8% PER 5.1x 4.6x 65.3x 17.6x 42.2x 21.0x P /BV 1.6x 1.1x 1.3x 1.2x 1.1x 1.1x EV/EB ITD A 2.8x 2.1x 7.3x 5.9x 6.5x 5.5x N etdebt/EB ITDA 1.3x 0.8x 3.8x 3.3x 3.4x 2.7x D ividend Yield 3.2% 23.6% 0.5% 1.7% 0.7% 1.4% S o urc e: C IC R D atabas e Sector: Steel ISIN : EG S3C 251C 013 LastP rice (EG P) 10.59 52 W eek H igh 21.50 52 W eek Low 7.05 100-dayA v. Volum e 1,239 (000' shares perday) N o. ofShares (m n) 543.3 M arketC ap (EG Pmn 5,753 *P rices as atclose on 30th M ay2011 - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 5.0 10.0 15.0 20.0 25.0 Jun-10 Aug-10 Oct-10 Dec-10 Mar-11 May-11 Shrs('000) EGP Volume ESRS EGX 30 rebased
description
Ezz Steel Rebars. ESRS.CA/ESRS EY |Sell Recommendation | Moderate Risk | LTFV EGP18.4 | Target Price EGP12 | Analyst: Hany Samy. Investment case A leading regional steel producer, with a market share of 40% in local market. - PowerPoint PPT Presentation
Transcript of Investment case A leading regional steel producer, with a market share of 40% in local market.
Investment case• A leading regional steel producer, with a market share of 40% in local market.• ESRS plans to expand locally to enhance margins and to meet local market needs.
ESRS has long term plans to produce 1.3 mtpa of Direct Reduced Iron by late 2011.
• The company is vulnerable to international steel prices, yet local resilient construction activity maintains full utilization of long products capacities.
• Backlogs of construction contracts will be completed over the coming 3-4 years, and will absorb local steel production.
Downside Risks• A local political and economic situation that has a negative impact on the demand for
new real estate units.• Furthermore, the company may witness an increasing number of cancellations• A regional and local political issue that has a negative impact on the tourism industry• Economic crises affected negatively Ezz flat steel sales - mostly directed to export
markets• ESRS plans to expand its final product capacity by mid 2012 to produce either long
or flat products with a total capacity amounting to 1,200 tons per annum
Ezz Steel Rebars
Company Profile
Ezz Steel is a joint-stock company established in April 1994 to manufacture steel rebars. ESRS' facilities in Sadat and 10th of Ramadan have a combined production capacity of 1.4mn tons per annum. Furthermore, ESRS owns 63.1% directly and indirectly of Al-Ezz Flat Steel (EFS), with a capacity is 1.3mn tons of flat steel per annum, most of which is directed to export markets.
ESRS also owns a 55% stake in Al-Ezz Dekheila for Steel- Alexandria (EZDK), which is the largest integrated steel plant in Egypt, with an annual production capacity of 1.78mn tons of long products and 1mn tons of flat products.
Shareholder Structure• Ezz Group Holding 64.6%• Free Float 35.09%• Banks, Insurance Companies, & Others 0.31%
52-Week Performance & Share Data (*EGX suspended 27th Jan – 23rd Mar 2011)
ESRS.CA/ESRS EY |Sell Recommendation | Moderate Risk | LTFV EGP18.4 | Target Price EGP12 | Analyst: Hany Samy
Key Performance IndicatorsEGP mn/ FY End:December 2007a 2008a 2009a 2010a 2011e 2012e
Revenue 16,159.4 21,843.1 12,589.3 15,224.9 13,564.2 15,267.0 Growth Rate (%) 38.8 35.2 -42.4 20.9 -10.9 12.6EBITDA 3,936.9 4,438.8 1,635.9 2,203.6 1,815.1 2,054.2 Growth Rate (%) 9.9 12.7 -63.1 34.7 -17.6 13.2EBITDA margin (%) 24.4 20.3 13.0 14.5 13.4 13.5Net Income 1,122.0 1,244.6 88.1 326.5 136.3 273.9 Growth Rate (%) 12.8 10.9 -92.9 n/m -58.2 100.9Net margin (%) 6.9% 5.7% 0.7% 2.1% 1.0% 1.8%
P ER 5.1x 4.6x 65.3x 17.6x 42.2x 21.0xP /BV 1.6x 1.1x 1.3x 1.2x 1.1x 1.1xEV/EBITDA 2.8x 2.1x 7.3x 5.9x 6.5x 5.5xNet debt/EBITDA 1.3x 0.8x 3.8x 3.3x 3.4x 2.7xDividend Yield 3.2% 23.6% 0.5% 1.7% 0.7% 1.4%
Source: CICR Database
Sector: SteelISIN: EGS3C251C013Last P rice (EGP ) 10.5952 Week High 21.5052 Week Low 7.05100-day Av. Volume 1,239 (000' shares per day)
No. of Shares (mn) 543.3 Market Cap (EGP mn) 5,753 *P rices as at close on 30th May 2011
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