EXECUTIVE SUMMARY
ACHIEVEMENTS IN LINE WITH EXPECTATIONS ..., ADJUSTMENT OF OUR 2021-2022 FORECASTS
Revenue supported by the recovery in “out of home” consumption
At the end of the 1st half of 2021, Cosumar posted an increase in its consolidated revenue of +2.9% to MAD 4,382 Mn driven by the recovery in “out of home” consumption following the easing of restrictions on mobility. Thus, sales of white sugar on the local market show a growth of +5.7% over the same period, returning to their pre-health crisis levels. Under these conditions, the operator was able to offset the decline in export activity over the same period.
EBITDA improved by 7.0% to MAD 976 Mn supported by a double positive effect. On the one hand, the recovery in consumption. On the other hand, the good performance of the local sugar crop yields through production of 340 KT in H1-21 against 325 KT in H1-20. These achievements are in line with our initial annual scenario, equivalent to annual achievement rates of 50% for revenue and 49% for EBITDA and NIGS (Cf. Listed Companies 2020 Results).
Export activity penalized by a less favorable international market
The Export activity would have decreased by -8.2%, from MAD 1,386 Mn in H1-20 to MAD 1,272 Mn in H1-21. This is attributed to the drop in the exported white sugar selling prices. The latter stood at an average of 4,118 MAD/ T in H1-21 against 4,466 MAD/T in H1-20, i.e. a decline of -7.8%. At the same time, we are seeing a downward trend in international refining margins. According to our calculations, the average white sugar/raw sugar spread fell by -13.0%, from 101 $/T to 88 $/T over the studied period.
A stock trading above our fundamental valuation
Since our BUY recommendation in January 2021, Cosumar stock posted a performance of 26%, exceeding our fundamental price of MAD 240. As of today, we believe that the Group's growth prospects are largely integrated into our valuation level.
As a precautionary measure and pending for new elements to justify a revision of our business plan, we are keeping our target price unchanged at MAD 240. Taking into account a price of MAD 280, the stock thus displays a valuation premium of 14% on the stock market. This could not be offset over the short-term by the stock’s D/Y levels.
Technically, our recommendation for the Cosumar stock is changed from BUY to SELL.
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