2Q16 results highlights: i) Reported net income: EGP124.4mn, +147% Y-o-Y, +335% Q-o-Q, +33% vs. EFGe; ii) Recurring net income : EGP140.8mn, +109% Y-o-Y, +67% Q-o-Q, +51% vs. EFGe; iii) Revenue: EGP3,928.8mn, +23% Y-o-Y, +34% Q-o-Q, +16% vs. EFGe; and iv) EBITDA: EGP401.9mn, +83% Y-o-Y, +35% Q-o-Q, +25% vs. EFGe   GB Auto reported impressive 2Q16 numbers with headline earnings growing 1.5x aided by strong revenue growth and margin gains –  the results beat our numbers on all levels with net income 33% above our estimate. Excluding non-recurring items, earnings were up 109% Y-o-Y and 51% above our estimate. FX losses, which have muted earnings growth on several occasions since 2011 despite decent operational performance, came in at a minor EGP6mn this quarter as it now reflects the differential between the black market and the official exchange rate in CoGS with the number primarily reflecting the repricing of FC assets and liabilities in the event of a devaluation in the official exchange rate.   Revenue rose 23% Y-o-Y (+16% vs. EFGe) mainly driven by 31% growth in Egypt passenger cars (c53% of 2Q16 revenue) driven by significant price increases. GB Auto also saw strong market share gains in passenger cars (record high of c39% for the quarter; flat volumes in a declining markets) as the company was able to meet market demand when competition could not due to FX shortages and launched new models that were well received by the market. Financing (c11% of revenue; +92% Y-o-Y), after-sales (c6%; +32%) and tires (c4%; +80%) also performed strongly. The main disappointment was two- & three-wheelers (c11%) that saw revenue drop 3% and gross margin ease c3.6pp Y-o-Y from a relatively low base as price increases weighed down on volumes and made it difficult to pass on further devaluation-related cost pressures.   Gross margin (ex. depreciation) added c2.4pp Y-o-Y with gross profit advancing 44% Y-o-Y (+8% vs. EFGe) with all segments delivering solid margin gains with the exception of two- & three-wheelers and financing. One of the quarter’s biggest surprises is flattish SG&A costs (+4% Y-o-Y; -13% vs. EFGe) driving EBITDA margin up 3.4pp Y-o-Y and EBITDA +83% Y-o-Y (+25% vs. EFGe).   An impressive results set especially in light of Egypt’s severe FX shortages and devaluation as the company’s strategy of building inventory to meet market demand proved successful. We reiterate our Buy rating on the stock.   The company is holding its results conference call on Monday 15 August at 16:00 Cairo time (15:00 London). We have also attached a detailed income statement table. (company, Hatem Alaa, CFA, Nada Amin)   GB Auto: EGP2.45 as of 10 August 2016, Rating: Buy, FV: EGP4.30 per share, MCap: USD302 mn, AUTO EY / AUTO.CA