KEY THEMES
After the trading session, Edita Food Industries [EFID] said it acquired a new bakery line that is expected to be operational by February 2022. The new line will upgrade EFID's bakery annual segment capacity by around 20% or 11,000 tons with an investment cost of EGP135mn. We note that EFID's bakery segment, the second largest behind the cake segment, has contributed 35% to Q1 2021 revenues, thanks to 35% higher volumes. We believe EFID may come under some pressure in 2021, facing headwinds such as thin volume growth or rising raw materials prices. That said, taking this into account we still think EFID can generate EGP720mn of EBITDA in 2021.
EFID has also seen some pressure in terms of its stock performance; it dropped 10% ytd to EGP8/share. We value EFID using forward EV/EBITDA multiple. Driven by a 5-7% increase in volumes (weighted) and 2.5-5% price increase (weighted) across all business lines, we pencil in revenues of EGP4.4bn in 2021. At an EBITDA margin of 16.5% and an EV/EBITDA multiple of 12x (33% below EFID’s historically-rich EV/EBITDA of 18x), we reach an equity value of EGP8.4bn which implies a price target of EGP11.6/share (an upside of 45%).