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Croatia

AD Plastik Group: Strong Q4 boosts FY 19 results

    Tea Pevec
    Tea Pevec

    Head of Research

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    InterCapital
    19 February 2020
    Published byInterCapital

    In FY 19, the AD Plastik Group recorded a 16.3% yoy increase in sales, which is in line with our estimates of HRK1.5bn. Sales growth was supported by the batch production start of the first series of Clio 5 and Ford Puma, as well as by the production of redesigned Twingo and Smart models. The company’s Croatian factories were operating at full capacity. 

    When breaking down operating revenue by markets, the EU and Serbian markets recorded HRK1.23bn in sales, which represents a 25.2% yoy increase. Despite a lag in growth of newly registered vehicles in the EU market throughout 2019, it was supported by the strong growth of activity in Q4, which resulted in an overall 1.2% yoy increase. AD Plastik was able to achieve strong results primarily due to the batch production start of the redesigned Twingo and the new Clio 5, due to increase in revenues from tools as well as revenues from the Hungarian company AD Plastik Tisza. Meanwhile the Russian market recorded HRK320.8mn in sales, which represents a 6% yoy decrease. The number of newly registered cars in this market also decreased by 2.3% in 2019. Furthermore, in the previous year, a more significant realisation of tool revenue was achieved, which affected the overall revenue generated. New deals in the amount of EUR158mn were concluded, which will ensure production capacity and further development and growth of the company in this market.

    EBITDA amounted to HRK 194.8mn in FY 19, which represents a 20.4% yoy growth. The company’s profitability increased as it reaps the benefit of the awaited serial production of new projects, notably the new Twingo and the Clio 5. This is broadly in line with our estimates, while our EBITDA margin for 2019 was expected somewhere lower (66bps at 12.0%). We expected most of the serial production benefits to kick in in this year, therefore we expect 2020 EBITDA margin to be at 13.1%. 

    Below the operating line, the net financial loss fell to -HRK14.5mn (from -HRK33.9mn recorded in FY 18). This is in line with our estimate and is a result of lower negative FX differences. On the other hand, income from associates, which is a profit from the shareholding in a Romanian company, is 6% below our estimates. This profit from associates is down 22.5% yoy. 

    AD Plastik’s bottom line increased by 10.4% yoy to HRK98.6mn. We expected net profit to increase slightly and since the growth in operating profitability was moved to Q4, we can conclude that the results are in line with our estimates. Even though AD Plastik’s net debt (HRK441.2mn) rose 16% since the beginning of the year, its net debt/EBITDA ratio has decreased to 2.3x in 2019 from 2.4x in 2018. This increase in indebtedness is in line with the investment cycle of the company, where it is financing part of the tools for the new projects. 

    Since AD Plastik’s FY results already show a strong improvement in profitability and are in line with our estimates, we keep our target price at HRK235 per share. Our TP provides an upside potential of almost 20% to the current share price.