Earnings Report /

Oriental Weavers: 3Q21 – Stable revenue growth and collected export rebates support bottom-line

  • Consistent topline growth on the back of higher exports volumes and higher local ASP

  • Export rebates support bottom-line

  • Continued strong performance expected with expansions ahead

Al Ahly Pharos Securities Brokerage
15 November 2021

Consistent topline growth on the back of higher exports volumes and higher local ASP

ORWE recorded a topline of EGP2.782 billion in 3Q21 (down 2.5% QoQ but up 7.5% YoY), in line with our expectations of EGP2.787 billion. Revenues for 9M21 amounted to EGP8.397 billion, up 26.0% YoY. Export revenues, which constituted 68% of total revenues, increased by 10.5% YoY but dropped by 4.4% QoQ and recorded EGP1.896 billion for the quarter as export demand remained robust throughout 3Q21. This annual increase is the result of 9.8% YoY increase in exports volumes sold but a drop of 6.3% QoQ in exports volumes. Moreover, the average selling price increased by 2.1% QoQ and 0.6% YoY to EGP81/sqm. ORWE witnessed a solid performance with sales continuing to improve building on the momentum from 2Q21.

Local revenues for 3Q21 were up 1.9% QoQ and 1.7% YoY and amounted to EGP886 million. This increase came despite of a drop of 6.3% QoQ and 6.8% YoY in total local volume sold. However, the average selling price increased by 8.8% QoQ and 9.1% YoY to EGP93/sqm. It is worth mentioning that wholesale revenues recovered and increased by 10% due to the anti-dumping fees that have been imposed on Turkish carpets.

Export rebates support bottom-line

3Q21 gross profit came in at EGP425 million (down 15.1% QoQ but up 11.0% YoY), reflecting a -2.3pps QoQ and +0.5pps YoY change in GPM to record 15.3%. The annual increase of GPM came on the back of strong topline growth as well as economies of scale.

ORWE recorded an EBITDA margin of 15.4% (-2.5% QoQ and -0.2pps YoY) for the quarter with an EBITDA of EGP428 million (down 16.1% QoQ but up 6.1% YoY). SG&A as a percentage of revenues increased by 0.4% QoQ and 0.4% YoY and reached 4.7%. EBITDA for 9M21 amounted to EGP1.428 billion (up 60.6% YoY) on the back of stable topline growth.

Attributable net profit amounted to EGP260 million (down 13.1% QoQ and 14.0% YoY); higher than our expectations of EGP220 million. This difference came on the back of EGP57.7 million export rebates collected and recorded during the quarter compared to export rebates of EGP91.6 million recorded in 3Q20. NPM recorded 9.3% (-1.2pps QoQ and -2.3pps YoY). Attributable net profit for 9M21 increased by 62.2% YoY and recorded EGP858 million with an NPM of 10.2% (+2.3pps YoY).  It is noteworthy that net interest expense amounted to EGP10.3 million during 3Q21 compared to a net interest income of EGP6.4 million in 3Q20 and net interest expense of EGP5.0 million in 2Q21.

Continued strong performance expected with expansions ahead

ORWE is implementing an expansion plan with planned capex of USD16 million in 2022 to meet the growing demand. Moreover, it is important to note that the anti-dumping fees on Turkish imported machine-rugs will continue to reflect positively on ORWE’s local sales and will increase wholesale volumes as well as the price flexibility. Furthermore, ORWE expects to collect a total of around EGP100 million of export rebates in 2021.

ORWE is currently trading at a FY22e P/E of 4.8x and EV/EBITDA of 4.5x.