KEY THEMES
Other than company-specific stories, our industrials analyst Dina Abdelbadie thinks that Egypt's rural development projects, dubbed the "Decent Life Initiative", could be a sigh of relief for many. This is a huge government initiative with investments of EGP500bn, to which the industrial sector contribution is estimated at EGP250bn (a 50% share). The initiative is about to be launched to develop Egypt's rural areas under a three-year development plan. This, she thinks, should help the industrial sector recover, especially after being hurt by COVID-19 and the fragile export environment. This project will require cables, transformers, water treatment and purification stations, sewer systems, and natural gas network extension. Thus, the analyst thinks this “Decent Life Initiative” will benefit different sub-segments within the industrials sector, such as building materials, paints, wires, cables, pipes, electrical products, carpets, furniture, and sanitary ware. Although it is early to tell which companies are poised to participate in this initiative, Ms. Abdelbadie thinks it will positively impact the industrial sector, even if the profit margin was not that high, as companies will (1) secure sustainable workflow and liquidity for three years and (2) find an outlet for their inventories which are currently hard to export in view of the COVID-19 precautionary measures by some countries.
Positive
We highlight some names in each sub-segment:
- Carpets: ORWE.
- Natural gas network extension: EGAS.
- Paints: PACH.
- Sanitary Ware: Ceramics manufacturers, such as CERA, LCSW, and PRCL.
- Steel: ESRS.
- Water stations: ORAS.
- Wires, Cables, and Transformers: SWDY, ELEC.