KEY THEMES
News sources point to a decision made by the Ministry of Trade & Industry to impose anti-dumping duty on Turkish machine-made carpets and rugs imports. Such a decision is for sure positive for local carpet makers in general and for Oriental Weavers Carpet [ORWE] in specific. We note that the local carpets market still has not recovered yet in terms of volumes since the EGP floatation. ORWE’s local sales saw a 4-year CAGR of 2% over the 2016-2020 period, driven only by a number of price hikes, where prices grew at a 4-year CAGR of 10%. Furthermore, local volumes dropped by a 4-year CAGR of 7% over the same period reaching 40.3mn sqm in 2020.
The decision is supposed to make imported carpets pricier and thus support demand for local production at higher prices. However, we note that ORWE’s stock has been on the rise for the last two months, reaching its best levels since March 2019. So far, we think the effect on the stock has been priced post the recent rally. While we see ORWE’s current price offering little to mediocre upside, we still like ORWE as a strong dividend payer and hence we suggest buying the dips. It is worth noting that ORWE at current prices is traded at forward P/E and EV/EBITDA of 6x and 5x, respectively.