Ezz Al Dekhela (EZDK) [IRAX.CA], a 55%-owned subsidiary of Ezz Steel [ESRS.CA], released its standalone financial results for 4Q2015, showing earnings of EGP56 million versus losses of EGP160 million in 3Q2015, losses of EGP10 million in 4Q2014, and our earnings estimate of EGP12 million for 4Q2015. On an operational level, gross profit came in at EGP307 million versus our estimate of EGP339 million and reflected a massive spike in GP margin to 13.1% versus 4.4% in 3Q2015 and our GP margin estimate of 11.3%. While full standalone financial statements have not yet been released, we believe the considerable improvement in earnings came primarily on several factors being i) prices on average remained flat Q-o-Q, while raw materials continued their downtrend; ii) gas supplies should have improved significantly during the quarter, following the end of summer months and the flow of LNG into local grid; and iii) as EZDK more than likely did not have material FX losses booked during the quarter as no major currency devaluation took place.   2016 likely to be a better year for Ezz Steel; turnaround in play: Overall, the positive earnings figure booked by EZDK in 4Q2015 highlights the start of a turnaround and return to profitability following a tough operating environment. We see this set of results as a confirmation to our call on better results for Ezz Steel, but we highlight that the company is not fully out of the woods yet. Nevertheless, in our view, 2016 should be the starting point for a recovery in Ezz Steel and a turnaround in profitability as negative factors impacting operations should begin to subside. We think that the commencement of ERM's DRI plant along with improved gas supply issues in Egypt should aid in this turnaround theme. While this improvement in the operating environment should play out well for the company's earnings, further gas supply cuts could come again during the summer months, and a further escalation in gas prices still lingers. Nevertheless, we are of the view that the market has penalised the stock severely; hence, we maintain our Buy recommendation on the stock. (Earnings release, Ahmed Hazem Maher)   Ezz Steel: EGP7.23 as of 31 January 2016, Rating: Buy, FV: EGP14.00 per share, MCap: USD502 million, ESRS EY / ESRS.CA