The solid return of Elsewedy Electric’s (SWDY) turnkey projects segment after a period of normalization stimulated revenue growth in Q1 2019. However, the increase in administrative expenses, provisions, and income tax, coupled with lower investment income and a swing to FX losses on a stronger EGP, marred the 12% y/y increase in revenues and 5% y/y increase in gross profit, leaving SWDY with lower net earnings of EGP957mn in Q1 2019 vs. EGP1.40bn in Q1 2018. A phase of cost optimization and a wider geographic footprint is next. Save for non-operational items, results are broadly in line with our operational estimates for 2019. Thus, we maintain our Overweight / Moderate Risk with 12M PT of EGP19.80/share (adjusted for the recent EGP0.80/share cash dividend).
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