Overcomes challenges with an interesting valuation
The results were aligned with our estimates, maintaining a favorable revenue recovery inertia, and highlighting the sequential profitability improvement in Wavin, Dura-line, and Koura
We consider that the company’s punishment has been excessive, since, despite the challenges, the strategies implemented have mitigated cost pressures and the valuation looks attractive with a FV/EBITDA of 4.0x
Results that should be well received by the market. The 2Q22 figures were aligned with our optimistic expectations in contrast of consensus estimates. Revenue advanced 18.7% y/y to $2.7 billion, while EBITDA increased 8.9% y/y to $609 million, reflecting a complicated comparative base. The most relevant was the profitability improvements in Dura-Line, Koura, and Wavin, even despite the challenges implied by the rise of raw materials costs, freight (logistics and distribution challenges particularly in Europe), and labor. The most significant advance in annual terms was in Dura-Line, favored by the substantial recovery in North America along with a favorable price environment. In Koura, the demand recovery for intermediate products, price dynamics, and a more favorable product-mix offset cost pressure. In turn, Polymer Solutions recorded a strong sale increase supported by high volumes and prices of specialty resins, although higher raw material and energy costs impacted profitability. In Wavin, the margins sequential advance stood out. Finally, in Netafim, growth was supported by America’s and Turkey’s growing demand, while EBITDA recovery was due to the partial transfer of higher costs. After 'Orbia Day', we reaffirm our conviction about the company’s positive outlook. We believe that the business has a drawn-up strategy that will allow it to continue with a remarkable trend of sustained growth for the following year while underpinning its healthy financial structure (ND/EBITDA of 1.8x), and a very interesting valuation. Therefore, we reiterate our recommendation to BUY and highlight it in our top-picks.
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