Although the global instabilities fueled by financial crisis are spread-out in the Romanian economy, in the last period, Azomures and Amonil, best performers of the stock exchange in the first half this year, have started to draw the attention of investors anew. Whether they slump to bottom level or climb to record highs, the two flagships of the chemical sector have benefited of favorable climate of the international fertilizers market.
In the latter sessions, the two companies followed same trend as the market, albeit the volumes and magnitude of declines, or hikes ranked them as trading’s favorites.
Thus, as of October 28, together with general growth of the stock market, the two companies registered in two successive sessions, upsurges near to the top limit, except the sessions on November 5 and 6, when AZO and AMO underwent major corrections, following the same general trend as the market. Specialists polled by Wall-Street explained that these appreciations were fueled by the investors’ optimistic expectations regarding the earning reports that will be made public in the coming period.
“The recent increases of the two stocks are given by the same factor that geared their advance in May – positive outlook on medium-term profit margins. Thus, for the third quarter, forecasts on earning report are at least equivalent to the outcome first half, considering the ongoing upward trend of urea’s quotation in August-September interval”, said Raluca Filip, financial analyst at Confident Invest.
At the same time, the relative undervaluation of the two companies compared to similar issuers in Europe made this growth possible, said Vlad Doruc, analyst at Vanguard.
“If we consider the earning multiples of the two companies (PER, P/S, P/BV, EV/EBITDA and EV/SalesPER, P/S, P/BV, EV/EBITDA and EV/Sales) have proper values, which means that these companies have a high appreciation potential. For example, PER earning multiple calculated for the two issuers ranges between 0.8 and 0.9 which is a lot less than the median calculated for the other issuers in Europe (13.9). Moreover, EV/EBITDA calculated for the two companies is at 0.76 (AMO) and 0.48 (AZO), which makes these shares attractive by comparison with 3.7 median at European level”, Vlad Doruc explained.
Companies benefited of urea’s price decline
The earnings for 2008 reported by the two fertilizer producers were spectacular, taking advantage of the favorable climate of fertilizers and urea market.
Azomures, Romania’s biggest fertilizer producer reported a net profit of 132.23 million lei (36 million euro) in first half this year, after the losses registered in the same interval a year ago, in the context of 55% rising turnover. In first half last year, AZO reported 6.13 million lei loss.
Romania’s biggest urea producer, Amonil Slobozia reported a net profit of 21.27 million lei (5.8 million euros) in first half this year, in the context of a 23fold growth of revenues from exploitation. In first half last year, AMO posted 7.14 million lei loss.
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