Daily analyst comments
Cherkizovo Group publishes strong financials for 1Q2010
27.05.10 10:35
We regard 1Q financials reported by Cherkizovo group as fairly strong. The results show 14% revenue growth and a 17% surge in net income. We separately note that the meat-processing segment broke even, enjoying a 4% net margin, the first such case since 2008.
On May 26, Cherkizovo Group disclosed unaudited financial results for 1Q2010. Revenue advanced 14% y-o-y to RUB 8 bn, with growth mainly driven by a pickup in finished product sales volumes. The poultry-breeding segment posted 6% growth y-o-y and the meat-processing and pig-breeding sectors showed growth of 9% and 79%, respectively. The EBITDA indicator, adjusted for the amount of one-off financial expenses and non-cash write-downs, climbed 13% to RUB 1.4 bn. An adjusted EBITDA margin practically did not change y-o-y, staying at 17.9%. For 1Q2010, the company posted a net income of RUB 926 mn, up 17% y-o-y, with net margin at 11.6%.
Cherkizovo Group: financial results for 1Q2010, mn RUB
We are positive on the 1Q results from the company, putting special emphasis on growth in net margin. We also draw attention to the fact that for the first time since 2008, the meat-processing segment broke even, enjoying a 3.9% net margin and contributing around 40% of overall revenue. We expect the segment to extend gains, taking advantage of the low effective interest rate (of 4%) on the company’s debt obligations and forecast growth in demand for meat and meat products.
Our target price for one common share in Cherkizovo Group, calculated using a peer group valuation approach, is USD 35.1.