The Egyptian Chemical Industries (Kima) is expected to issue soon its financial results for the third quarter (3Q) of the fiscal year (FY) 2019/20, ending in March, with Naeem Research expecting underlying losses to persist.
Kima’s sales (top-line) are expected to be flat at EGP 60m, and the net income (bottom-line) to see a loss of EGP 25m (versus a loss of EGP 37m in 2Q FY20). Both prices and volumes of urea and nitrate fertilisers are expected to be flat compared to the previous quarter.
“A crucial point to note, however, is that our estimates could be subject to upside risks, as we do not yet take into account the commencement of production and exports of the new factory Kima 2 starting March (800ktpa of integrated urea and nitrates). As per local insight, while the new factory has begun partial operations as well as exports (to India and Europe), we are unable to verify and presume that the asset is fully consolidated into the books yet,” according Naeem.
Naeem continues to recommend a Buy on kima with a target price of EGP 8.59/share; with natural gas sourced at a competitive price of $3.5/mmbtu (versus $4.5/mmbtu paid by most of its competitors), Kima 2’s margins are estimated to be the highest among local peers and likely to translate to a significant jump in earnings run rates for Kima at the consolidated level
