Sector: Metals
MMK has released its 1H 08 consolidated financials, which show a considerable increase in revenue, but a downturn in margins for all key indicators. A decline in margins against a rise in revenue was generally expected by the market and reflected the plant's input materials insufficiency. MMK's strategy to increase self-sufficiency in raw materials should have a positive impact on the company's financials in future.
On August 20, MMK released its 2Q 08 consolidated financials. In 1H 2008, the company's gross margin declined as compared to the year-earlier due to an outrunning growth in cost of production (up 49%) in relation to revenue upturn (up 41%). Other margins also declined by 3% on average. As was expected, the share of coal and metal scrap in the structure of the company's cost of production also went up due to a rapid rise in the price of these resources. The proportion of steel blanks and slabs in the total sales structure advanced from 4.47% to 10.55%.
Table 1. MMK: Financials 2Q 08 and 1H 08, USD million
| Indicator | 2Q 2008 | 2Q 2007 | Change 2Q08/1Q07 | 1H 2008 | 1H 2007 | Change 1H08/1H07 |
|---|
| Revenue | 3,484 | 2,155 | +61.7% | 5,653 | 4,000 | +41.1% | | Gross profit | 1,398 | 917 | +52.4% | 2,154 | 1,652 | +30.4% | | Gross margin | 40.13% | 34.85% | 5.28 p.p. | 38.1% | 41.3% | -3.2 p.p. | | Operating profit | 974 | 628 | +55.1% | 1,367 | 1,077 | +26.9% | | Operating margin | 27.96% | 29.14% | -1.18 p.p. | 24.2% | 26.9% | -2.7 p.p. | | EBITDA | 1,107 | 727 | +52.3% | 1,573 | 1,225 | +28.4% | | EBITDA margin | 31.77% | 33.74% | -1.97 p.p. | 27.83% | 30.63% | -2.8 p.p. | | Net profit | 760 | 516 | +47.3% | 1,031 | 866 | 19.05% | | Net margin | 21.81% | 23.94% | -2.13 p.p. | 18.24% | 21.65% | -3.41 p.p. |
Source: company data, Finam estimates
In a phone conference on the published results, MMK spokespersons voiced the company's goals: In 2008, MMK plans to raise its revenue by 60% y-o-y by boosting production volumes and increasing prices for metal products. However, in line with the management's plans, MMK's EBITDA margin should be 28% in FY 2008, a 3.5% decline y-o-y.
In line with our estimates, the fair value of MMK is USD 1.37 per share, which corresponds to a Buy recommendation. Sulinov Aleksey
Other comments of the day
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MMK
Capitalization: $2 681 839 200,00
Common shares:
Price: $0,24
Delta week: 35,9%
Delta month: -8,3%
Delta year: -81,9%
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0.569
0.073
