KEY THEMES
Yesterday, we issued our core coverage note on Misr Chemical Industries [MICH], a stock we picked first back on 16 July 2020 along with 18 other EGX-listed stocks. MICH was our only materials stock at the time that we liked. Since then, the stock is up 87% from EGP5.93 to trade last yesterday at EGP11.10, having hit an intraday high of EGP12.40 along the way (a 109% return). So, is it all over for MICH yet? Well, we tend to think there is still value to be had, especially given the continuation of the current COVID-19 scene. Indeed, our 12M price target of EGP13.9 suggests a 25% off yesterday’s close. According to Mohamed Saad, MICH came in this year with an interesting turnaround story, anchored by (1) considerable cost savings and (2) resilient top-line figures. Through the years, the chloralkali manufacturer has been exposed to risks associated with hikes in electricity prices and fluctuating caustic soda and chlorine markets. However, the COVID-19 pandemic brought about sound demand for MICH’s key products and byproducts. Going forward, we believe MICH’s performance will stabilize at levels above historical average, driven by this pandemic-related recovery.