The Ministry of Trade and Industry has decided to extend the decision of imposing antidumping fees on steel imports for a period of two months, following the end of the earlier four-month period. Antidumping fees will be set at the same exact parameters as was done in June (i.e. Turkey: 10-19%; China 17%; and Ukraine 15-27%), but would now end during December. 
 
Based on our discussion with Ezz Steel's management, the decision comes as the Ministry of Trade and Industry is conducting a more thorough investigation into the parties involved in dumping steel in the Egyptian market. We think that this short-term extension will only offer a short-term relief to the company's margins, given the short-term nature of the extension. However, the likely introduction of long-term fees (following the completion of the investigation), would definitely offer a massive upside to the company, as it would expand its margins to benefit from such a decision. Already, local producers in the past four months have upped their margins to benefit from the antidumping fees and the disappearance of steel imports, which will now continue for another two months, and possibly further, if the decision is extended again.
 
We will be reviewing our numbers for Ezz Steel and Ezz Dekheila to reflect the two-month extension of the antidumping fees, but highlight that the stock is currently trading at undemanding levels of cUSD365/t, which is a massive and unjustified discount to i) global peers; ii) replacement value; and iii) the latest transaction occurring in the Egyptian market at an EV of cUSD650-700/t; hence, we reiterate our Buy ratings on Ezz Steel and Ezz Dekheila. 
 
Ezz Steel: EGP18.32 as of 26 Sep 2017, Rating: Buy, TP: EGP27.50/share, MCap: USD564mn, ESRS EY/ESRS.CA