AGR Listed companies Mid-Term results 2020 : lack of visibility and mixed outlook

Executive summary

The sharp deterioration in the earning power of listed companies at the end of H1-20 seems to be widely expected by the market. As proof, the low liquidity level during September 2020 which is marked by the release of listed companies’ mid-term results. This is the weakest month of Septem-ber in terms activity over the last 7 years with an average daily volume of MAD 49 Mn only.

Beyond the historic drop in profits, the publication of half-year results is a real opportunity allowing us, on the one hand to assess the pandemic impact on the main listed sectors and, on the other hand, to update the growth forecasts for our stock guide during the period 2020-2021.

At the end of this exercise, we come out with 3 key points :

• The earning growth posted by listed companies in H1-20 stands at -56%. Adjusted for donations dedicated to the Covid-19 fund, the recurring earning power would settle at MAD 10,840 Mn, down -32%. This decline is attributed to a cost effect rather than an activity effect. In fact, we are witnessing a significant provisioning effort from listed companies as a result of the health crisis’ repercussions on the quality of credit risk ;
• The main contributor to the decline in Equity market earnings is the banking sector. The latter recorded an increase in its cost of risk of MAD +5,141 Mn, i.e. + 141% compared to H1-19. The historic provisioning effort observed in the first half of 2020 is largely justified by the lack of visi-bility regarding the evolution of the health situation in Morocco. Thus, assuming a recovery in the economic climate;
• The update of our growth forecasts for AGR stock guide, which represents 87% of the market capitalization, shows a decline in recurring earnings of -15.8% in 2020 followed by a recovery of + 11.3% in 2021. To this end, the sectors which stand out for their resilience during this period are Telecom, Agribusiness, Distribution, Mining and NIT.

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