• Earnings drop 10% Y-o-Y on high SG&A and provisions EIPICO reported a 10% Y-o-Y fall in 4Q15 earnings to EGP81 mn (29% below our estimate), mainly due to higher SG&A expenses and provisions Y-o-Y. The miss versus our estimate was driven by lower than expected revenue (-6%, mainly export driven), higher depreciation (21% above our estimate) and provisions. FY2015 earnings were up 15% Y-o-Y, driven by 8% revenue growth and lower taxes. We will revisit our forecasts to reflect the impact of the recent EGP devaluation; however, we expect a moderate impact to profitability as export sales cover 80-85% of the imported raw material bill.
• Modest Y-o-Y sales growth impacted by drop in export sales Revenue inched-up 4% Y-o-Y to EGP406 mn, (6% below our forecast). Local sales rose 8% Y-o-Y (3% above our estimate) offsetting the 15% Y-o-Y drop in export sales (-34% vs estimate), which was the worst quarter in 2015. The export sales drop was driven by late deliveries in 4Q but should recover in 2016. Export sales rose 13% Y-o-Y in 2015, contributing to 21% of total revenue growth (20% in 2014), while local sales rose 6% due to base effect as 2014 saw significant growth after the inauguration of the new plant. EIPICO added only 7 new products in 2015 much lower than expected as the ministry of health is applying more stringent tests on products that led to delays in product launches ; EIPCO expects stronger additions in 2016.
• Margin softens on high SG&A Gross profit was flattish Y-o-Y (+1%) as revenue growth was largely offset by higher COGS leading to 150 bps Y-o-Y narrowing in gross profit margin to 61.2% (-150 bps versus our estimate), while EBITDA decreased 5% Y-o-Y (-13% vs estimate) on higher SG&A (+14% Y-o-Y), leading to 3.4 pp contraction in EBITDA margin to 38.6% (-3.1 pp versus our estimate).
• Proposed DPS of EFG3.5 implying 6% yield The Board of Directors (BoD) has recommended a DPS of EGP3.50, above last year’s DPS of EGP3.30 and in line with our forecast. The proposed dividend implies a payout ratio of 78% and yield of c6%.

Tarek El-Shawarby