Hermes sets Ezz Dekheila fair value at EGP 693

EFG-Hermes defined the fair value of Al Ezz Dekheila Steel Co. - Alexandria (EZDK) at EGP 693, which represents 20% upside potential to its market price of EGP 579.

The investment bank reiterated a Neutral rating on lack of short-term catalysts, adding that it will revise estimates to reflect the newly-approved 25% corporate tax rate.

The steel producer’s FY11 financial results are expected to be adversely affected by a drop in sales due to the significant slowdown in construction activity since year-start. Margins could be better than previously expected if EZDK produces using the low-cost iron ore contracted for 4Q-10, which has remained in its inventories.

The EGX-listed company reported FY10 unaudited consolidated financial results last Monday. It revised FY10 unaudited net income to EGP 681 million from EGP 724 million. This brings Q4-10 net income to EGP 74 million, down 69% Y-o-Y and 15% Q-o-Q.