Cairo - Mubasher: MubasherTrade Research has initiate their coverage of Kafr El Zayat Pesticides (KZ) with a Buy/Moderate Risk rating and a price target (PT) of EGP 53.83.
“Today, and following an impressive performance in 2016, we are reiterating our positive view on the company. In 2016, KZ almost doubled its earnings, with growth coming mainly on the operational level, most likely supported by higher exports,” MubasherTrade Research indicated in a report issued on Monday.
In October 2016, the research firm highlighted the company as a stable business, trading at very low multiples while offering a high yield.
“We note that KZ's management strives to raise export levels to benefit from a weaker EGP post-devaluation in November 2016. KZ also started 2017 on a positive note, with earnings spiraling 45% higher year-on-year to EGP 24.2 millon, driven by 21% year-on-year growth in revenues to EGP 139.9 million and wider operating margins,” the report added.
MubasherTrade also identified the key risks facing the pesticides company, saying that although the pesticides market is linked to agriculture, a highly stable and vital sector in the Egyptian economy, key risks include competition arising from low-quality and cheap Chinese imports, forex shortage and an EGP devaluation may impact KZ's profitability margins and inventory levels as it imports the majority of its raw materials, and the dependency on a related party for distribution and sales, namely Albert Pesticides, which may be given preferential treatment.
