Today’s Trading Playbook
Abdelkhalek Mohamed | Equity Analyst
aabdelkhalek@egy.primegroup.org
KEY THEMES
Elsewedy Electric [SWDY] announced its first quarter results last Tuesday, whereas management held a conference call on Thursday, discussing Q1 2022 results. Here are the main takeaways.
Solid quarter for SWDY: Net earnings reached EGP761mn (+8.7% y/y). On the other hand, gross profits came at EGP2.3bn (+26.1% y/y), while GPM decreased to 12.5% compared to 15.0% in Q1 2021. We note that top line rose to EGP18.6bn (+51% y/y). The increase in revenues came driven by the wires & cables segment (+47.5% y/y), turnkey segment (+65.5% y/y) and transformers segment (+69.2% y/y). In general, top line growth was attributable to (1) Inflating prices of products, and (2) tepid growth in the wires & cables segment volumes.
Narrowing margins: SWDY's GPM decreased in turnkey and wires & cables segments from 13% and 12% respectively to 10% for both segments, which SWDY claims to be the normal GPM for the segments and to be in-line with market norms. Transformers segment GPM had a huge drop from 29% to 14% due to restructuring costs in Indonesia.
How FX played out for SWDY in Q1 2022: SWDY's ending backlog as of 31 March 2022 reached an all-time high of EGP73bn due to partially FX impact. The backlog is composed of 51% civil & networks projects, 27% transmission & distribution HV, and 22% power generation projects.
New investments: The new Busway factory cost amounted to USD10mn and SWDY expects the factory to contribute to less than 1% of total revenues. On the other hand, SWDY had acquisitions in Pakistan and Indonesia that added up to USD60mn, as management were targeting these markets due to dense population.
SWDY is one of the 15 stocks we had picked in our STANDPoint 2022 strategy outlook published on 30 January 2022. We have an Overweight rating for the name, with our 12MPT of EGP14.3/share (ETR +102%). SWDY is currently traded at TTM P/E of only 4x.
Now, on to the top news and analysis for the day.
Top News & Analysis
MACRO NEWS
The Prime Minister will launch a new industrial partnership with the UAE and Jordan. (Enterprise)
Moody’s has cut its outlook on Egypt’s credit rating to negative. The negative outlook reflects the rising downside risks to the sovereign's external shock absorption capacity. (Moody's)
The EU is working on an agreement to import more Israeli gas through Egypt, given the situation of Russia-Ukraine war. (Enterprise)
The government has purchased 3mn tons of local wheat since the start of the harvest season. (Cabinet)
CORPORATE NEWS
Orascom Construction [ORAS] announced a consortium with Siemens Mobility and The Arab Contractors to build an additional 1325KM of tunnels to the 625KM contracted last year to reach a total of 2000KM.
Housing and Development Bank [HDBK] announced its standalone Q1 2022 results. The figures showed a tepid net income growth of 3% y/y to EGP640mn, despite a satisfying 18% y/y increase in net interest income (NII) and a lower y/y effective tax rate of 23.5% vs. 28%.
Lecico Egypt [LCSW] consolidated statements for Q1 2022 show the company turning into profitability with EGP33.33mn net profits compared to a loss of EGP14.16mn in the same period last year. Revenues came at EGP745mn compared to EGP600mn in Q1 2021 (+24% y/y). (Mubasher)
Heliopolis Housing & Development [HELI] announced its 9M 2021/22 results, registering a net profit of EGP19.2mn (+18% y/y) vs. EGP16.3mn a year earlier with a slight revenue growth of 1.1% y/y to EGP297.5mn.
Arab Developers Holding [ARAB] released its Q1 2022 unaudited financials, recording net losses of EGP8.66mn vs. net profits of EGP18.85mn in Q1 2021, on a lower revenue of EGP186.56mn (-41.4% y/y) vs. EGP318.16mn in the same period last year.
Arab Co. for Asset Management & Dev. [ACAMD] released unaudited financial results for Q1 2022, decreasing net losses of EGP1.78mn vs. net losses of EGP1.86mn in the same period last year
Lafarge Cement Egypt is planning to initiate talks with ECA to renew the production quota for cement producers.