• Recurring earnings up 30% Q-o-Q, ahead of estimate 1Q16 reported earnings of EGP758mn (vs. EGP239mn in 1Q15, EGP283mn in 4Q15) were boosted by a large FX gain of EGP267mn (on revaluation of USD receivables, related to the fast track project in Egypt). Operationally, Elsewedy reported a strong set of results: adjusted EBITDA of EGP797mn (+95% Y-o-Y, +18% Q-o-Q), +11% vs. estimate on higher margin, and recurring earnings of EGP492mn (+117% Y-o-Y, +30% Q-o-Q), 18% above estimate. Results were supported Q-o-Q by resilient turnkey projects’ deliveries (25% of revenue) and group EBITDA margin expansion. We reiterate our Buy rating on Elsewedy as it continues to benefit from power network expansions in Egypt, trades on single-digit multiple, and offers high single-digit dividend yield. We maintain our recurring forecasts for FY16.
• Restatement of financials to reflect changes in EAS Presentation of financials was adjusted to reflect changes in Egyptian accounting standards (EAS); notably, net profit from previously-consolidated Qatar (proportionately), Sudan, and other (smaller) operations now appear as “Income from Investments” under the equity method. 1Q15 figures have been restated to be comparable with 1Q16.
• Revenue and profitability surge Y-o-Y; margins expand Q-o-Q Adjusted cable volumes (excluding Qatar and Sudan) were up 24% due to growth in Egyptian (local and export) and Algerian operations, and GP/tonne soared on higher profitability in Algeria. Adjusted volumes slightly softened Q-o-Q as 4Q15 included exceptionally large orders in Saudi Arabia. Turnkey projects deliveries remained as high as in 4Q15 at EGP1.2bn (with contributions from Egypt fast track and Beni Suef projects), and the GP margin expanded to 24%. Turnkey backlog stands at EGP21.4bn (59% Egypt, 22% Sub Saharan Africa, and 15% GCC). Electrical products GP increased 30% Y-o-Y on higher revenue and profitability, while Q-o-Q’s 19% growth was mainly on margin.

Wafaa Baddour, CFA