Read in PDF
Elsewedy Electric [SWDY]
Egypt / Industrials / Q4 2021 Results
12MPT: EGP14.3 (+53%)
set on 30 Jan 2022
Investment Rating: Overweight | Risk Rating: Medium
Earnings came broadly in line
Elsewedy Electric’s [SWDY] Q4 2021 revenues increased by 31.6% y/y to EGP19.7bn (+32% q/q), driven by growth across the board (except for meters) but was led by the wires & cables segment. However, consolidated net income after minorities slipped 4.3% y/y to EGP1.2bn (+76% q/q) on a drop in GPM to 14.9% (-4pp y/y, +3.4pp q/q) which nonetheless came in 1.4pp above our expectations. For the year as a whole, net earnings recorded EGP3.5bn (+16.7% y/y), coming in line with our estimates of EGP3.5bn (+1.2% vs. PRe). In general, SWDY was able to end the year on a strong note, after some challenges faced during Q3 2021.
Segmental performance was a mixed bag in Q4 2021
Wires & Cables: The largest revenue contributor (49% in 2021, 80% contribution to total revenue growth y/y in Q4 2021), wires & cables revenues jumped 70% y/y during the quarter to EGP9.4bn, driven mainly by higher prices as volumes grew 3.4% y/y. However, GPM slumped y/y to 10% in Q4 2021 vs. 13.2% in Q4 2020 but higher than the 8.5% in Q3 2021.
Turnkey: The second largest revenue contributor (42% in 2021, 14% contribution to total revenue growth y/y in Q4 2021), turnkey revenues increased 8.2% y/y in Q4 2021 to EGP8.8bn. Gross profit dropped in absolute and relative terms to EGP1.6bn (-2% y/y). GPM weakened to 18% in Q4 2021 compared to 20%. Meanwhile, backlog grew notably to EGP70bn in Q4 2021 (+43% y/y, +23% q/q) vs. EGP57bn in Q3 2021.
Transformers: Despite its small contribution to revenues (3% in 2021, 3.5% contribution to total revenue growth y/y in Q4 2021), transformers revenues increased 38.6% y/y to EGP596mn. However, gross profit decreased 63.3% y/y to EGP60.7mn in Q4 2021, leading GPM to narrow to 10.2% vs. 38.5% a year before. Meanwhile, backlog decreased to USD119mn in Q4 2021 (down from USD133mn in Q3 2021). We note that SWDY started to consolidate its two recent acquisitions of Indonesia’s CG Power System and Pakistan’s Valdius Engineering Ltd. in Q3 2021.
Electric Products: With its small contribution to revenues (1% in 2021, 2.1% contribution to total revenue growth y/y in Q4 2021), electric products revenues more than doubled y/y to EGP198mn. Boasting the second highest margin across all segments, electric products recorded a gross profit margin of 51%.
Meters: The segment continued to underperform this quarter, but with revenues falling only 2% y/y to EGP637mn (+35% q/q) on recovering selling prices. Gross profit decreased 7.3% y/y; hence, gross profit margin came in at 31.9% in Q4 2021 vs. 33.7% a year before. Meanwhile, backlog increased to EUR152mn in Q4 2021 vs. EUR110mn in Q3 2021.
Renewables: The smallest segment (less than 1% of revenues in Q4 2021), renewables revenues grew by 19.5% y/y to EGP97.8mn in Q4 2021.
Overweight and 12MPT maintained
SWDY is now trading at a TTM P/E of 5.8x and EV/EBITDA of 4.6x, with ROE of 18.5%. In view of Q4 2021, we maintain our rating as Overweight with the same 12-month price target (12MPT) of EGP14.3/share.
Abdallah Ismail
Equity Analyst
T +202 3300 5716