Mubasher: MubasherTrade Research lowered their price target (PT) for MB Engineering by 26% from EGP 7.38 per share to EGP 5.45 per share, according to a recent report issued on Sunday.
MubasherTrade also maintained their ‘Buy/High Risk’ rating, taking into account the higher working capital needs, higher financing costs, and higher weighted average cost of capital (WACC) due to the higher cost of debt and hence cost of equity.
“This still offers an expected total return of +37%, hence we maintain our Buy/High Risk rating. We note that our valuation does not include the potential added value from the company's new circuit breakers factory in Sixth of October City, the details of which are yet to be announced,” the research firm said in the report.
“MB Engineering is gradually shifting from a pure trading business model to a full-fledged manufacturing and trading business model. The manufacturing business yields higher profitability margins,” the report indicated.
The company's net profits decreased by 7.4% to EGP 4.67 million in the first nine months of 2016 from EGP 5.04 million in the same period last year.
