Today’s Trading Playbook
KEY THEMES
Expect Stronger Q4 2021: Elsewedy Electric’s [SWDY] 9M 2021 consolidated net income increased by 32% y/y to EGP2.3bn. Meanwhile, revenues increased by 30% y/y to EGP40.9bn. Meanwhile, GPM narrowed to 11.5% in Q3 2021 vs. 17.6% a year earlier. This comes due to some fluctuations in prices and accounting treatments. Management expects a strong Q4 2021.
Acquisitions are starting to pay off: During Q3 2021, SWDY witnessed a strong increase in the transformers backlog which increased to USD133mn in Q3 2021 (up from USD88mn in Q2 2021). The big move came mainly from Indonesia. However, Pakistan still needs some restructuring and it expected to contribute positively in H1 2022.
More debt to come: Net debt position increased in Q3 2021 to EGP5.9bn compared to a net debt position of EGP4.0bn in Q2 2021 due to higher metal prices, coupled with the recent acquisitions. Moreover, SWDY targets to have a debt-to-EBITDA level around 1x. The expected increase in debt in 2022 will be due to the expected delay in some collections.
Dividend policy: No figures are announced yet. However, as SWDY quests for growth, cash will be crucial in order not to pressure the company's balance sheet.
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