Equity Analysis /

EDITA: 4Q19 – Volume-driven topline; FX-strength supports margins, Maintain OW

  • EFID’s FY19 topline recorded EGP4,025 million (+6.6% YoY), driven in part by a 4.7% YoY increase in packs sold

  • FY19 GPM came in at 35.3% (+3.3pps YoY), with all of Edita’s segments recording margin expansion during the year

  • EFID currently trades at 2020 P/E of 18.2x and EV/EBITDA of 9.5x vs EM snack-food players’ multiples of 22.7x & 10.5x

Al Ahly Pharos Securities Brokerage
27 February 2020

Big plans ahead, Maintain overweight

Over the course of 2019, EFID installed 2 candy production lines and a wafer line, which the company has already capitalized on by launching 3 products during FY19. The impact of these investments is expected to materialize further over the course of FY20. Edita also plans to leverage on the available capacities in the E-08 factory to introduce new offerings, such as the recently launched ‘Molto Sandwich’ and ‘Molto Magnum’ in the bakery segment. Meanwhile, the company will also explore new revenue streams from new segments in the snack food market, capitalizing on its brand equity and strong marketing campaigns with efficient go-to-market plans.

The company has also invested heavily in its regional presence in Morocco, through the lease agreement secured during 1H19 for a 13k sqm plot of land, with a nine-year extendable tenor, on which Edita is to build the new facility. Construction of the company’s manufacturing plant officially kicked-off in the final quarter of 2019 with operations set to commence one year later. Edita’s expansion plans are also financially supported by USD20 million of financing from the IFC and a MAD15 million grant from the Moroccan government. The company aims to replicate their business model in the Moroccan market by positioning the facility as a stepping stone into West and North African Markets.

EFID proposed a stable cash dividend of 0.20/share, which translates to a dividend yield of 1.4% and a payout ratio of c.40%. EFID is currently trading at 2020 P/E of 18.2x and EV/EBITDA of 9.5x versus EM snack-food players’ multiples of 22.7x and 10.5x.