Recurring net income : EGP91.2mn, -21% Y-o-Y, -35% Q-o-Q, -25% vs. EFGe Reported net income: EGP39.4mn, -62% Y-o-Y, -68% Q-o-Q, -67% vs. EFGe Revenue: EGP4321.4mn, +36% Y-o-Y, +10% Q-o-Q, +9% vs. EFGe Gross profit: EGP611.8mn, +37% Y-o-Y, -3% Q-o-Q, -4% vs. EFGe EBITDA: EGP374mn, +60% Y-o-Y, -7% Q-o-Q, +1% vs. EFGe   GB Auto reported a 62% Y-o-Y decline in headline earnings despite solid operational performance, mainly on FX losses (EGP81mn on settling CKD-related liabilities vs. EGP40mn a year ago) and a more-than-doubling of net finance costs. Also, the company booked tax charges of cEGP13mn for the quarter vs. cEGP13mn tax reversal in 3Q15 (retroactive adjustment to reflect the reduction in Egypt’s tax rate to 22.5% from 30%). Excluding one-offs, recurring earnings were down 21% Y-o-Y and 25% below our estimate on the high net finance costs. Revenue advanced 36% Y-o-Y (+9% vs. EFGe), driven mainly by 52% growth in Egypt passenger cars (c57% of 3Q16 revenue) driven by: i) significant price increases (+34%); and ii) a 13% increase in volumes as the company continued its strong market share gains (another record-high of 41.5%), as it was able to meet market demand when competition could not due to FX shortages and launched new models (including Chery earlier this year that booked a 7.6% market share in the quarter) that were well received by the market. Higher-margin segments performed strongly: financing (c10%) +48%, commercial vehicles (c7%) +10% (mostly volume-driven on trucks and construction equipment) and after-sale (c5%) +52%.  Two- & three-wheelers (c12%)  were disappointing for the second consecutive quarter as revenue fell c1% (volumes -25%, as price increases weighed down on volumes (a more price-sensitive segment) and made it difficult to pass on further devaluation-related cost pressures. Gross margin (ex. depreciation) was flattish, with gross profit advancing 37% Y-o-Y (-4% vs. EFGe), with all segments delivering solid margin gains with the exception of Egypt passenger cars (-c1.1pp reversing a three-quarter advance) and two- & three-wheelers (-3pp). SG&A costs growth was tame (+11% Y-o-Y; -11% vs. EFGe) driving EBITDA margin up 1.3pp Y-o-Y and EBITDA +60% Y-o-Y (broadly in line). Including FX losses booked in the quarter (since the bulk of them are cash losses related to open positions related to pre-sold CKD inventory), EBITDA would have been up a still strong 26% Y-o-Y   Another solid results set, especially in light of Egypt’s severe FX shortages in the quarter as the company’s strategy of building inventory to meet market demand proved successful. We expect further FX challenges (higher costs and large FX losses on repricing of FC liabilities) in the coming quarter that will likely be partly offset by continued price increases. We reiterate our Buy rating on the stock. (Earnings release, Hatem Alaa, Nada Amin)   GB Auto: EGP2.76 as of 10 November 2016, Rating: Buy, FV: EGP3.80 per share, MCap: USD187mn, AUTO EY / AUTO.CA