InterCapital Croatia - IC Company Note - Koncar Group 9M13, Nov 4, 2013

IC COMPANY NOTE - Koncar Group

Strong operating performance on higher domestic sales

Koncar Group (“Koncar”) posted 3.8% higher sales in 9M 2013 compared to the equivalent period last year totalling HRK 1,759.9m, of which HRK 854.7m was generated in the domestic market (up 5.2% YoY), while the remaining portion was realized in foreign markets (up 2.5% YoY). Other operating revenues amounted to HRK 161.4m and were 16% higher YoY, thereby including HRK 120.1m of revenue from termination of provisions.

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The most significant domestic buyers in 9M 2013 included HEP (41.4% of sales) and trading companies (18.6%), while the biggest export markets were Germany (HRK 93.6m), Sweden (HRK 86.6m), B&H (HRK 74.9m), Austria (HRK 55.9m), Finland (HRK 48.8m) and Czech Republic (HRK 35m).

Although sales have shown improvement, operating expenses were slightly curbed, thereby resulting in 17.2% higher EBITDA or 80bps increase in EBITDA margin
amounting to 7.6%. Meanwhile, EBIT gained 18.3% in the first nine months and totalled HRK 86.5m.

Ultimately, net income dropped 2.8% YoY and amounted to HRK 105.4m, as the share of income from affiliated companies also declined by 23.6%. Among the 21 member companies of the Group, 15 of them posted positive earnings while 6 companies experienced bottom line losses totalling HRK 43.8m.

In the first nine months of the year Koncar Group contracted HRK 1,820.7m of new deals, which is 9.9% more than in the equivalent period last year (48% of those deals have been arranged in the domestic market and HRK 1,131.5m is scheduled to be completed in 2013). The total order book balance at the end of September 2013 amounted to HRK 2,267.1m or 2.8% more than at the beginning of the year.

We will factor in the new information regarding Koncar Group’s operations in our upcoming valuation update. Until then we are placing the target price under review.

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Tel: + 385 1 482 58 90 * Fax: + 385 1 482 58 99
http://www.intercapital.hr/ , e-mail: brokeri@intercapital.hr

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