Ezz Al Dekhela (EZDK) [IRAX.CA], a 55% owned subsidiary of Ezz Steel [ESRS.CA], released its consolidated 4Q2015 results with bottom line finally turning positive for the first time after five consecutive loss making quarters. Consolidated earnings after minority came in at a positive EGP87 million versus losses of EGP248 million in 3Q2015 and losses of EGP112 million in 4Q2014, fueled by i) an expansion in EBITDA margins (12.2% in 4Q2015 vs 0.3% in 3Q2015 and 4.9% in 4Q2014) as finished steel prices in Egypt were more resilient and held steady vs dropping raw material prices (iron ore: -15%, Scrap: 17%); ii) natural gas supplies have improved during the quarter as summer months came to an end; and as iii) one-off gain at EFS (cEGP118 million) was related to contract revisions for the company's contracts with its supplier of industrial gases.   Despite the positive improvement on margins, excluding the impact of one-off items, the company would have still incurred losses of cEGP31 million. Nonetheless, we are positive on the turnaround in profitability at the operational level as well as continued improvement in the global steel dynamics.   Expect a positive spill-over into Ezz Steel; Buy: We believe that the positive set of results posted by EZDK should bode well for Ezz steel and likely to spill-over to a stronger-than-expected set of results for the group. We estimate that EZDK's earnings could likely even be driven up to EGP100 million in earnings during 4Q2015 for the group, which poses an 18% upside to our full year 2015 loss making estimates. While the positive set of results is not sizeable in relation to the company's overall magnitude, and despite the fact that the positive earnings booked in 4Q2015 were fueled by one-off items, we think that the improved operational results is a sign of a turnaround in profitability and that operational performance should only improve from here as positive factors have continued to play out in 2016.     We note that several positive factors have played out for the company as of late; being i) a cut in the natural gas prices to the steel sector to USD4.5/mmbtu from USD7/mmbtu, which will lead to considerable cost savings and margin expansion; ii) an improvement in the global steel pricing scene on the back of production cuts in China (global steel export hubs in Turkey and China have reported a USD30-50/tonne price increases); and iii) beneficial FX related regulations being adopted by the central bank of Egypt, which will likely make foreign currency more available for raw material needs. On top of that, the company has recently inaugurated its new DRI plant earlier in January 2016, which should feed into substantial cost advantage post the newly revised natural gas price. We reiterate our Buy rating on Ezz Steel and think that the stock is now being offered at attractive valuations (2016e P/E of 6.5x). (Ahmed Hazem Maher, Company)   Ezz Steel: EGP8.93 as of 20 March 2016, Rating: Buy, FV: EGP14.00 per share, MCap: USD546 million, ESRS EY / ESRS.CA