EXECUTIVE SUMMARY
REVISION OF OUR GROWTH FORECASTS, ...IN A CONTEXT OF MARGIN PRESSURE
Revenues up sharply, driven by the Export business
At the end of the 1st half of 2022, Cosumar recorded an increase in its consolidated revenue of +16% to MAD 5,076 Mn, driven mainly by the Export activity. This rose by +68%, going from MAD 1,272 Mn in H1-21 to MAD 2,137 Mn in H1-22. This is due to a double positive Price/Volume effect.
According to the Foreign Exchange Office statistics, the export selling price would stand at MAD 5,583 T in H1-22 against MAD 4,118 T in H1-21, an increase of +36%. On the other hand, the volumes exported jumped by +24%, going from 309 KT to 383 KT over the same period. Compared with our annual forecast, the achievement rate of revenue settles at 50%.
Margins under pressure due to rising energy costs
Contrasting with the positive commercial achievements, EBITDA and NIGS fell by -7.5% and -15.9% respectively. Under these conditions, the EBITDA margin has deteriorated by -4.5 pts, going from 22.3% in H1-21 to 17.8% in H1-22.
These changes can be explained by two factors. On the one hand, the drop in volumes produced by local sugar crops (whose margin level is higher than the refining activity). On the other hand, the surge in the coal price internationally, the main input by sugar refineries. The price of coal has more than tripled, going from an average of 97.2 $/T in H1-21 to 316.2 $/T in H1-22. Note that this bullish trend continues during H2-22, through a spot price around 450 $/T.
A revision of our recommendation from SELL to HOLD
Taking into account the less favorable weather conditions and the higher energy bill, we have readjusted our scenario for the evolution of margins over the 2022-2023 period. Furthermore, we are maintaining a positive contribution from the Export activity and Durrah project.
Technically, we are witnessing an increase in the cost of capital under the effect of the increase in both the risk premium toward stocks and bond yields.
In the end, our target price for Cosumar stock comes out at MAD 195 against MAD 240 initially (see Research Paper Cosumar H1-21). Based on the current stock price, we are adjusting our recommendation from SELL to HOLD.
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